1. Open market share purchase: --95% of repurchase is done through this method--Daily re-purchase of shares from market is limited--The company may not openly announce that it will re-purchase shares from open market
Fixed price tender offer Single purchase price and number of shares sought are mentioned. Person would like to sell to the company should come with offer of the price and number of shares that he offers to the company. The fixed price is usually set at a premium above the current market price.
3. Dutch auction share repurchases
4.Equal access buy-backs All share holders have given equal opportunity to sell shares to the company.
5.Selective buy-backs In broad terms, a selective buy-back is one in which identical offers are not made to every shareholder, for example, if offers are made to only some of the shareholders in the company. The scheme must first be approved by all shareholders, or by a special resolution (requiring a 75% majority) of the members in which no vote is cast by selling shareholders or their associates. Selling shareholders may not vote in favour of a special resolution to approve a selective buy-back
on-market buy-backs andminimum holding buy-back A listed company may also buy back its shares in on-market trading on the stock exchange, following the passing of an ordinary resolution.The stock exchange’s rules apply to on-market buy-backs. A listed company may also buy unmarketable parcels of shares from shareholders (called a minimum holding buy-back). This does not require a resolution but the purchased shares must still be cancelled.
CASE STUDY : : BERGER PAINTS CASE STUDY BERGER PAINTS
17 December, 1923- Started Presently Dhingra , their relatives and companies controlled by them, currently hold 73.53% of the paid-up capital of the Company. Profit making company having an uninterrupted dividend record since 1981.
OBJECTIVE To provide an exit opportunity to those shareholders who so desire In a manner that does not substantially impact the market price of the Company’s shares, has been made This is expected to enhance the EPS of the Company in future and create long-term share value.
THE OFFER AND PRICE
• The number of equity shares bought back would depend upon the average price paid for the equity shares bought back. maximum offer price = Rs. 60/- per equity share aggregate consideration amount=Rs.1859 lakhs maximum number of shares = 3098333 equity shares aggregating=1.56% of the total paid up equity shares as on 29 April 2005.
The aggregate shareholding of the promoters as on 29 April 2005 is 146543273 equity shares constituting 73.53 % of the listed share capital of the Company. Share purchased - 1009924 equity shares The maximum purchase price - Rs. 37.00 on 2 February, 2005 The minimum purchase price was Rs. 30.75 on 9 November, 2004 Shares Sold - 89620 equity shares representing inter se sale among promoters only.
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 = 2:1
Restriction’s On Buyback A special resolution has to be passed in general meeting of the shareholders. Buyback should not exceed 25% of the total paid-up capital and free reserves. A declaration of solvency has to be filed with SEBI and Registrar Of Companies. The shares bought back should be extinguished and physically destroyed. The company should not make any further issue of securities within 2 years, except bonus, conversion of warrants, etc.
Effect of Buy Back on Stock Exchange
Contradicting sections on Buy-back of shares in India Section 77 of the Companies Act does not allow a company to buy its own shares until the winding up of companies. But the subsequent Section 77A permits buyback subject to certain conditions.
Section-77 of the CompaniesAct Most of the sections in the Companies Act tries to protect the interest of the outsiders who had lent money in the form of debentures or loans or deposits by restricting company not to pay unless outsiders(loan vendors) are paid fully. Share holders are paid last and has taken maximum risk in the company.
Buy Back Of Reliance Energy 2008 Mr. Anil Ambani (Reliance Energy) bought back 6,50,000 equity shares of the company in the morning on Tuesday at nearly Rs.1,279.23/share aggregating Rs.831.5 million. Amounting 10 % the company`s equity and free reserves.Reason:- To increase the price of its shares.Result:- At noon Friday, shares of the company were trading at Rs.1,310 up by Rs.28.20 from its previous close at the BSE.
Buy Backs in Future Reliance Industries, 12 crores shares worth Rs 10,440 crores. JP Morgan chase and co, 370 million shares worth $15 billion Apple, shares worth $10 billion following the end of fourth qtr.
CONCLCONCLUSIONUSION CONCLUSION Buybacks should be used as an opportunity to exit only when there is concern over a company’s prospects or when the post-buyback free float is expected to shrink considerably. In most other cases, buybacks do offer the lure of an immediate benefit–but you might be better off as a residual shareholder, and gain from a hike in the share of assets and profits of the