Sunday, February 6, 2011

Polaris software - Insiders accumulating

Polaris softwares has been witnessing unusually high volumes with upward price movement since last few days. On 4th Feb it went up 10% when the overall market was up only 1%. Then on 5th Feb it went up more than 2% when the overall market was down more than 2% and that too on a volume thrice as large as it witnessed the previous day with total number of shares traded close to 5 Million shares (around 5% of the company's equity).

Polaris usually declares an interim dividend in the first fortnight of February. This time it is expected to declare an interim dividend of Rs. 2.00 to 2.25 per share. But there seems to something else beside dividend which insiders knows but we are yet to know. If the cash and cash eqivalent of Rs. 508 crores is some kind of indication then following events might occur:

1. BUYBACK - The company is trading at a very low valuation of less than 8 times forward year earnings. Considering the attractively low valuation that company trades at and huge cash surplus that the company has, there is a reasonable probaility of a buyback announcement to part utilize the idle cash reserve and boost the investor's sentiment in the company.

2. Special Dividend - In terms of cash per share the company has approximately Rs 50/- Per share, more than 25% of the current market price of Rs 190/-. To reward the existing shareholder and boost investors confidence in the comapany a special dividend cannot be ruled out.

3. Bonus - In such a depressed market condition and lower valuation that company is trading at, a bonus issue is also a possibility to lift the investors confidence in the company.

It is to be noted that above events are just a possibility and might not occur. The above scenarious are built based on the high trading interest witnessed in the stock in last few trading seesions.

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