buy back of securities objectives

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    BUY BACK OF SECURITIES

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    Objectives

    To increase promoters holding Increase earning per share Rationalise the capital structure by writing off capital not represented by available assets. Support share value To thwart takeover bid To pay surplus cash not required by business To service equity more efficiently

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    Conditions

    Authorised by the Articles of association of the Company. By Board resolution - not exceeding 10% of the paid up capital and free reserves. By special resolution at General Meeting - not exceeding 25% of paid up capital and free reserves. Buy back of equity not to exceed 25% of the total paid up capital & free reservesin the financial year. Not to exceed in any financial year 25% of the total equity paid up capital of the company.

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    The ratio of the debt owed by the company is not more than twice the capital andits free reserves after such buyback. Notice containing special resolution tohave explanatory statement stating :o o o o o

    Disclosure on all material facts Necessity for buy back Amount to be invested under buy back Time limit for completion of buy back Class of security intended for buy back

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    There has been no default in :o o o o o

    Repayment of deposits or interest thereon Redemption of debentures/preference shares Payment of dividend Repayment of term loan or interest thereon Filing of Annual Returns, Annual Account etc.

    Shares or other specified securities for buy back are fully paid up. Buy back oflisted securities to be in accordance with SEBI regulations.

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    Resources of Buy Back

    Free reserves. An amount equal to nominal value of shares so purchased shall betransferred to CRR.Securities premium account. Proceeds of issue of any shares or securities.

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    Modes of Buy Back

    Existing securityholders on a proportionate basis. The open market through (i)book building process; (ii) stock exchanges. Odd lots.

    Purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity

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    Securities not available for Buy Back

    Securities in lock in period Nontransferable securities

    Disputed securities kept in abeyance

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    Declaration of solvency

    After the passing of resolution but before making buyback, file with the Registrar and the SEBI a declaration of solvency. Declaration must be verified by an affidavit to the effect that the Board has made a full inquiry into the affairs ofthe company. That company is capable of meeting its liabilities and will not berendered insolvent within a period of one year of the date of declaration adopted by the Board. Signed by at least two directors of the company, one of whom shall be the managing director, if any.

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    Issue of further shares

    Every buy back shall be competed within 12 months of Board / special resolution.No issue of same kind of securities, in any manner, upto 6 months of completionof buy back.

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    Register of securities bought backAfter completion of buy back, company shall maintain register of securities bought back with following :

    Consideration paid for securities bought back; Date of cancellation of securities; Date of extinguishing and physically destroying of securities; and Such otherparticulars as may be prescribed.

    Where a company buy back its securities, it must extinguish and physically destroy such securities within 7 days of the last date of completion of buy back.

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    ProhibitionA company shall not directly or indirectly purchase its own securities : Through any subsidiary company including its own subsidiary companies; or Through anyinvestment company or group of investment companies.

    Filing of returnA company shall after completion of buy back, file with registrar and SEBI a return containing particulars of such buy back within 30 days of completion of suchbuy back.

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    Procedure for buy back

    After passing of board/special resolution, make a public announcement in at least one English National, one Hindi National and Regional Language Daily. Announcement shall specify a date, which shall be "specified date" for the purpose of determining the names of shareholders to whom the letter of offer has to be sent.Public notice shall be given containing disclosures as specified in Schedule I of the SEBI regulations.

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    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. Copy of the Board resolution authorising the buy back shall be filed with the SEBI and stock exchanges. Date of opening of the offer shall not be earlier than 7 days or later than 30 days after the specified date. Offer shall remain open for a periodof not less than 15 days and not more than 30 days.

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    Escrow Account

    The company should deposit in an Escrow account opened with a scheduled bank onor before opening of offer an amount :o

    Where estimated consideration payable does not exceed Rs.100 crores, 25% of consideration payable; Where consideration payable exceeds Rs.100 crores, 25% upto Rs.100 crores and 10% of the balance.

    o

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    Payment of consideration

    Payment for buy back to be made within 7 days from date of completion of verification of offers. Verification of offers to be done within 15 days of closure ofoffer. Payment to be made to those security holders whose offers have not been rejected in full or in part. After completion of verification, within 7 days securities to be returned to security holders whose offers have been rejected.

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    Public advertisementpost buyback

    Within 2 days of completion of buy back, public advertisement to be issued containing :o o o o

    o

    Number of securities bought back Buy back price Total amount invested in buy back Details of security holders from whom securities exceeding 1% were bought backConsequent changes in capital structure and share holding.

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    Buy back through Stock Exchange

    Max. Price at which buy back shall be made shall be specified. Only through stock exchanges having electronic trading facility. The company is shown as the purchaser on the electronic screen. Appointment of merchant banker. Public announcement at least 7 days prior to commencement of buy back. Copy of such public announcement to be filed with SEBI within 2 days of announcement.

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    Only at stock exchanges having nation wide trading terminals. Company & Merchantbanker to furnish information, to SEBI, of securities bough back on daily basis. Publish such information on fortnightly basis in a national daily. Publish information every time when additional 5% buy back is completed. No letter of offerrequired. Company to purchase all securities offered by holder without attaching any condition.

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    If seller has attached any condition, such securities should not be bought back.Promoters/persons in control not allowed to sell. Company not under an obligation to place buy orders on daily basis. Company should pay to brokers on every settlement date.

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