BUYBACK OF

SHARES IN INDIA
PRESENTED BY:
P RASH AN T B H ARD WAJ
AMIT JAIN
TUS H AR SI N GH
N IJO JO SE

 The Concept Of Buying Back Is A Recent One In

India.

The

Companies

Amendment

Act,

1999

Introduced This Concept Of Buying Back Of Shares.

THE CONCEPT
OF BUYBACK

Buy Back Of Shares Means The Purchase By The

Company Of Its Own Shares.
Buyback Is A Method Of Cancellation Of Share
Capital.
A Company Can Resort To Buyback To Reduce The
Number Of Shares Issued And Return Surplus Cash
To The Shareholders.
Buyback Of Equity Shares Is An Important Mode Of
Capital Restructuring.

OBJECTIVES OF BUYBACK
To Improve EPS.
To Provide An Additional Exit Route To Shareholders When Shares Are
Under Valued Or Are Thinly Traded.
To Enhance Consolidation Of Stake In The Company.
To Achieve Optimum Capital Structure.
To Prevent Unwelcome Takeover Bids.
To Improve Return On Capital, Return On Net Worth And To Enhance The
Long Term Shareholder Value.
To Support Share Prices During Sluggish Market Conditions.

CRITERIA OF BUYBACK
The company has exhausted all avenues of fresh investments/outlay
in the near future.
Buyback can be undertaken without jeopardizing the lenders risk.
The company enjoys a return on capital employed which is
significantly higher than the normal cost of borrowing.
The market price of the companys share is far lower than its
intrinsic value.

SOURCES OF BUYBACK

According To Section 77A(1) Of The Companies Act, 1956 A Company May

Purchase Its Own Shares Out Of:

Its Free Reserves,

The Securities Premium Account,

The Proceeds Of Any Shares.

At The Time Of Buyback, A Company Must Have Sufficient Balance In Any One
Or More Of These Accounts To Accommodate The Total Value Of The Buyback.

CONDITIONS OF BUYBACK
The Buy-back Is Authorized By The Articles Of Association Of The Company.
The Ratio Of The Debt Owed By The Company Is Not More Than Twice The Capital
And Its Free Reserves After Such Buy-back.
There Has Been No Default In Complying With The Provisions Of Filing Of Annual
Return, Payment Of Dividend, And Form And Contents Of Annual Accounts.
All The Shares Or Other Specified Securities For Buy-back Are Fully Paid-up.
The Buy-back Of The Shares Or Other Specified Securities Listed On Any Recognized
Stock Exchange Shall Be In Accordance With The Regulations Made By The
Securities And Exchange Board Of India In This Behalf.

PROCEDURE FOR BUYBACK

Where a company proposes to buy back its shares, it shall make a public
announcement in at least one English National Daily, one Hindi National daily and
Regional Language Daily at the place where the registered office of the company is
situated.
The public announcement shall specify a date, which shall be for the purpose of
determining the names of shareholders to whom the letter of offer has to be sent.
A public notice shall be given containing disclosures as specified in Schedule I of the
SEBI regulations.
A draft letter of offer shall be filed with SEBI through a merchant Banker. The letter
of offer shall then be dispatched to the members of the company.

PROCEDURE FOR BUYBACK

(contd.)
A copy of the Board resolution authorizing the buy back shall be filed with the
SEBI and stock exchanges.
The date of opening of the offer shall not be earlier than seven days or later
than 30 days after the specified date.
The buy back offer shall remain open for a period of not less than 15 days and
not more than 30 days.
A company opting for buy back through the public offer or tender offer shall
open an escrow Account.

THANK
YOU