Nucleus Software stock hits 20% upper circuit as board to consider share buyback on Aug 22

The stock of this IT services company has declined nearly 4 percent so far this year

Shares of Nucleus Software Exports were locked in 20 percent upper circuit at Rs 1,411 apiece on August 20 as the company plans to mull buyback of its equity shares two days later. This will be the third buyback, if approved, for Nucleus after 2017 and 2021.

The buyback offer could either be done via tender offer route or open market value. A share buyback benefits company by reducing number of outstanding shares, thereby, increasing earnings per share or share price of the company. Additionally, it helps improve financial ratios of the company like return on equity (RoE) or return on asset (RoA).

The last buyback by Nucleus Software was done in 2021 at Rs 700 per share. Since then, the stock has risen over 69 percent. However, the stock of this IT services company has declined nearly 4 percent so far this year, underperforming benchmark Nifty 50's 12 percent rise.

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For the June quarter, Nucleus Software reported a consolidated revenue of Rs 195.4 crore, down from Rs 206.8 crore in Q1 FY24. The company's profit-after-tax (PAT) also dropped to Rs 30.2 crore, compared to Rs 53.6 crore in the same period last year.

Moreover, EBITDA margin also saw a sharp contraction to 14.8 percent in Q1FY25, as against 27.7 percent in the year-ago period. EPS for the quarter stood at Rs. 11.28, down from Rs 20 a year back.

The order book position is Rs 813.4 crore, including Rs 752.2 crore of product business and Rs 61.2 crore of project and services business.

Going ahead, the management expects to recover strongly in upcoming quarters. "It was only that we had in the year 2021-2022, we had allowed our bottom line to hit a low of 7 percent, and then we have bounced back. And in a similar situation, we are confident that we'll bounce back on the financial numbers also in coming quarters," they said in their earnings conference call.

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