CARE Ratings surges 10% as board to consider share buyback plan on July 20

Shares of CARE Ratings surged 10 per cent to Rs 457.15 on the BSE in Wednesday’s trade after the company said its board will consider a share buyback plan on July 20, Wednesday.

At 09:38 am, CARE Ratings was trading 9.6 per cent higher at Rs 455 on the back of heavy volumes. In comparison, the S&P BSE Sensex was up 0.35 per cent at 54,075 points. The trading volumes on the counter had jumped over five-fold with a combined around 520,000 shares having changed hands on the NSE and BSE.

The stock had hit a 52-week low of Rs 402.75 on May 11, 2022. It nearly halved (down 49 per cent) from its 52-week high level of Rs 783.25 on August 3, 2021.

In the past six months, CARE Ratings has underperformed the market by falling 27 per cent, as compared to a 12 per cent decline in the S&P BSE Sensex. In the last one year, it has slipped 36 per cent as against a 2.6 per cent rise in the benchmark index.

The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.

For the fourth quarter ended March 2022 (Q4FY22), CARE Rating’s consolidated total income fell 14.3 per cent from Rs 85.25 crore to Rs 73.06 crore, which was largely impacted by reversal of provision last year Consolidated net profit decreased from Rs 26.49 crore to Rs 23.31 crore. The consolidated financials include those of CARE Ratings and its four subsidiaries.

The government has strong capex plans for FY23 and the private investors were also showing encouraging intent of investment. However, the recent global and domestic uncertainties could cause some delay in private investment pick-up, said Ajay Mahajan, MD and CEO of CARE Ratings Ltd.

‘We believe that given our focus on new ratings business and tapping new opportunities for non-ratings business, we should be able to remain on track for developing CareEdge as an Analytics focussed organisation’, he said. 

Tech Outlook

Target: Rs 526

Support: Rs 445

With Wednesday's sharp upmove, the stock of CARE Ratings has breached the upper end of the Bollinger Band of Rs 445. A sustainence above this level will cement its position as the immediate support. The stock is now testing the 20-week moving average (20-WMA), placed at Rs 475. Beyond this, the next target is seen at Rs 526 (the super trendline resistance), and Rs 538 (the 100-WMA).

The momentum oscillators, too, highlight a positive trend in the stock. However, the price-to-moving averages action suggest weakness in the stock.

(With inputs from Nikita Vashisht)