ppt on buy back of share

8/4/2019 Ppt on Buy Back of Share

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BUYBACK OF SHARES


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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.


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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.


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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.


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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.


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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;


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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;


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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.


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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


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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.


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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.


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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.


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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.


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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


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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


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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


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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.


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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


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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)


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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


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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.

.


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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


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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.


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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


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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.


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THANK YOU


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ppt on buy back of share

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