Ppt on Buy Back of Share
Transcript of Ppt on Buy Back of Share
-
8/4/2019 Ppt on Buy Back of Share
1/30
-
8/4/2019 Ppt on Buy Back of Share
2/30
BUYBACK OF SHARES
-
8/4/2019 Ppt on Buy Back of Share
3/30
Buy Back ?
The repurchase of outstanding shares(repurchase) by a company in order to reducethe number of shares on the market.
Companies will buyback shares either to
Increase the value of shares still available (reducingsupply),
or
to eliminate any threats by shareholders who may belooking for a controlling stake.
-
8/4/2019 Ppt on Buy Back of Share
4/30
Sections
The provisions regulating buy back of shares arecontained in Section 77A, 77AA and 77B of theCompanies Act,1956.
These were inserted by the Companies(Amendment) Act,1999.
The Securities and Exchange Board of India(SEBI) framed the SEBI (Buy Back of Securities)
Regulations,1999 and the Department ofCompany Affairs framed the Private LimitedCompany and Unlisted Public company (BuyBack of Securities) rules,1999 pursuant toSection 77A(2)(f) and (g) respectively.
-
8/4/2019 Ppt on Buy Back of Share
5/30
Objectives
Increase promoters holding
Increase earning per share
Rationalize the capital structure by writing off capitalnot represented by available assets.
Support share value
To thwart takeover bid
To pay surplus cash not required by business
In fact the best strategy to maintain the share price in abear run is to buy back the shares from the openmarket at a premium over the prevailing market price.
-
8/4/2019 Ppt on Buy Back of Share
6/30
Resources of Buy Back
A Company can purchase its own shares from
Free reserves;
securities premium account;or
proceeds of any shares or other specifiedsecurities. A Company cannot buyback its
shares or other specified securities outof the proceeds of an earlier issue ofthe same kind of shares or specifiedsecurities.
-
8/4/2019 Ppt on Buy Back of Share
7/30
Conditions
The buy-back is authorized by the Articles ofassociation of the Company;
A special resolution has been passed in the general meeting
of the company authorizing the buy-back.
The buy-back is of less than twenty-five(25%)
The ratio of the debt owed by the company is not more than
twice the capital and its free reserves after such buy-back;
-
8/4/2019 Ppt on Buy Back of Share
8/30
Conditions continue
There has been no default in any of the following
in repayment of deposit or interest payablethereon,
redemption of debentures, or preference shares or payment of dividend, if declared, to all shareholders
within the stipulated time of 30 days from the dateof declaration of dividend or
repayment of any term loan or interest payablethereon to any financial institution or bank;
There has been no default in complying with theprovisions of filing of Annual Return, Payment ofDividend, and form and contents of Annual Accounts;
All the shares or other specified securities for buy-
back are fully paid-up;
-
8/4/2019 Ppt on Buy Back of Share
9/30
Conditions continue
The buy-back of the shares or other specifiedsecurities listed on any recognized stock exchangeshall be in accordance with the regulations madeby the Securities and Exchange Board of India in
this behalf; and
The buy-back in respect of shares or otherspecified securities of private and closely held
companies is in accordance with the guidelines asmay be prescribed.
-
8/4/2019 Ppt on Buy Back of Share
10/30
Sources from where the shares willbe purchased
The securities can be bought back from
existing security-holders on a proportionate basis;Buyback of shares may be made by a tender offerthrough a letter of offer from the holders of shares
of the company or
the open market through book building process; stock exchanges or
odd lots, that is to say, where the lot of securitiesof a public company, whose shares are listed on arecognized stock exchange, is smaller than suchmarketable lot, as may be specified by the stockexchange; or
purchasing the securities issued to employees of
-
8/4/2019 Ppt on Buy Back of Share
11/30
Procedure Where a company proposes to buy back its shares, it
shall, after passing of the special/Board resolutionmake a public announcement at least one EnglishNational Daily, one Hindi National daily and RegionalLanguage Daily at the place where the registeredoffice of the company is situated.
The public announcement shall specify a date, whichshall be "specified date" for the purpose ofdetermining the names of shareholders to whom theletter of offer has to be sent.
A public notice shall be given containing disclosuresas specified in Schedule I of the SEBI regulations.
A draft letter of offer shall be filed with SEBI througha merchant Banker. The letter of offer shall then bedispatched to the members of the company.
-
8/4/2019 Ppt on Buy Back of Share
12/30
Procedure continue
A copy of the Board resolution authorizing thebuy back shall be filed with the SEBI and stockexchanges.
The date of opening of the offer shall not beearlier than seven days or later than 30 daysafter the specified date
The buy back offer shall remain open for aperiod of not less than 15 days and not more
than 30 days.
A company opting for buy back through thepublic offer or tender offer shall open an escrowAccount.
-
8/4/2019 Ppt on Buy Back of Share
13/30
Penalty
If a company makes default incomplying with the provisions thecompany or any officer of the company
who is in default shall be punishablewith imprisonment for a term whichmay extend to two years, or with finewhich may extend to fifty thousand
rupees, or with both. The offences are,of course compoundable under Section621A of the Companies Act,1956.
-
8/4/2019 Ppt on Buy Back of Share
14/30
Issue of further shares after Buyback
Every buy-back shall be completedwithin twelve (12) months from thedate of passing the special resolution
or Board resolution as the case maybe.
A company which has bought back anysecurity cannot make any issue of the
same kind of securities in any mannerwhether by way of public issue, rightsissue up to six(6) months from thedate of completion of buy back.
-
8/4/2019 Ppt on Buy Back of Share
15/30
SHARE BUY-BACK: POSITIVEASPECTS
It could enable a company toachieve its desired capital structuremore quickly or facilitate a major
restructuring.
It could avert a hostile takeover bid
by reducing the number of shares incirculation
-
8/4/2019 Ppt on Buy Back of Share
16/30
Market generally interprets buy-back as apositive aspect
Shareholders have a choice of deciding whether
or not to receive the payout by selling orholding their shares, unlike a dividend payout.
Returning excess cash by way of a share buy-back gives a company greater flexibility with
regard to its dividend policy
-
8/4/2019 Ppt on Buy Back of Share
17/30
SHARE BUY-BACK: NEGATIVEASPECTS
Re-purchase of its own shares mayconversely have a negative signalingeffect.
Management may not seek to utilize anyexisting excess cash effectively
-
8/4/2019 Ppt on Buy Back of Share
18/30
Possible mismanagements may arise if-
Too high a price is paid for the re-purchasedshares or if
Cash resources are eroded to the level thatcould give rise to a risk of insolvency.
A return of funds by way of a share buy-back is
less certain than an annual dividend stream.
-
8/4/2019 Ppt on Buy Back of Share
19/30
-
8/4/2019 Ppt on Buy Back of Share
20/30
INTRODUCTION OF HUL
Unilever set up its first Indian subsidiary, HindustanVanaspati Manufacturing Company(1931),followed byLever Brothers India Limited (1933) and United TradersLimited (1935). These three companies merged to formHUL in November 1956;
Unilever holds 52.10% equity in the company. The restof the shareholding is distributed among about 360,675
individual shareholders and financial institutions
-
8/4/2019 Ppt on Buy Back of Share
21/30
Continue
Hindustan Unilever Limited (HUL) is India's largest FMCG
Company
Two out of three Indians are using hul products with over
20 distinct categories these are..
Home & Personal Care Products
Foods & Beverages.
The companys Turnover is Rs. 20, 239 crores (for the 15
month period January 2008 to March 31, 2009)
-
8/4/2019 Ppt on Buy Back of Share
22/30
OBJECTIVE
We meet everyday needs for nutrition, hygiene and
personal care with brands that help people feel good,
look good and get more out of life
Our deep roots in local cultures and markets around the
world give us our strong relationship with consumers
and are the foundation for our future growth
-
8/4/2019 Ppt on Buy Back of Share
23/30
THE OFFER AND PRICE
11 June 2010 -approved the proposal for buy-back of
the Companys own fully equity shares of Rs. 280/-
(face value of 1/-) each..
Buy-back to the extent of or less than: 25% of the paid up equity capital and free reserves payable in
cash for an aggregate amount not exceeding Rs 630 croresof the Company as per the Audited Balance Sheet as onMarch 31, 2010.
maximum number of shares = 3098333 equity shares
aggregating=2.25 Crores which would translate intoabout 1% of the total equityof the total paid up equityshares as on 7 september 2010.
.
-
8/4/2019 Ppt on Buy Back of Share
24/30
THE OFFER AND PRICE
The Buy-back was effected by the Company from theopen market using the nationwide electronic tradingfacilities of BSE and NSE
The Buy-back Offer was open from August 23, 2010 to
March 28, 2011 and a notice of closure was issued to BSEand NSE on March 24, 2011.
The Buy-back was effected by the Company from theopen market using the nationwide electronic trading
facilities of BSE and NSE
-
8/4/2019 Ppt on Buy Back of Share
25/30
-
8/4/2019 Ppt on Buy Back of Share
26/30
The capital structure of the Company,Pre and Post Buy back
Authorised Share CapitalRs 225,00.00 Lakhs comprising of 225,00,00,000
Equity Shares of Re 1/- each
Issued, Subscribed and Paid up Capital As on June 11, 2010
(being the date of Board Meeting)- Rs 218,16.87 lakhs comprising of 2,18,16,86,781Equity shares of face value of Re 1/- each.
As on August 11, 2010 (being the date of PublicAnnouncement)
- Rs 218,23.20 lakhs comprising of 2,18,23,19,802Equity shares of face value of Re 1/- each.
As on March 28, 2011 (being the date of Closure of Buy-back)- Rs 215,94.37 lakhs comprising of 2,15,94,36,598
Equity shares of face value of Re 1/- each.
-
8/4/2019 Ppt on Buy Back of Share
27/30
IMPACT
The buy-back had not impaired the growth of
the Company and also contributes to the
overall enhancement of shareholder value.
Generated sufficient cash flows to meet the
requirements of the present business and to
its stakeholders.
The debt equity = 1:5
-
8/4/2019 Ppt on Buy Back of Share
28/30
CONCLUSION
Buybacks should be used as anopportunity to exit only when thereis concern over a companys
prospects or when the post-buybackfree float is expected to shrinkconsiderably. In most other cases,buybacks do offer the lure of animmediate benefitbut you might bebetter off as a residual shareholder,and gain from a hike in the share of
assets and profits of the business.
-
8/4/2019 Ppt on Buy Back of Share
29/30
THANK YOU
-
8/4/2019 Ppt on Buy Back of Share
30/30