Castrol gets lubricated

Castrol India is doing pretty today, up 4.25% at Rs.325, with an intra day high at Rs.329.40. Its 52-week high is at Rs.338. Volumes are huge at 68,000 shares.

The stock is up on two counts – firstly, the company is set to declare its Q1 results today, which largely are expected to be good and secondly, more importantly, the Board is also scheduled to meet today to consider reduction in share capital. This, the company has stated is a way to return a part of the nominal value of the shares to the shareholders of the company.

In simple terms, capital reduction refers to decreasing the share capital of the company through share cancelaltion and share repurchase. Its aim is to give better value to shareholder as floating stock goes down and enhances valuation and it is also done for bringing in a more efficient capital structure. Sometimes, in this process of capital reduction, shareholders get cash payments for the cancelled shares. Castrol will declare today how it plans to go about this.