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Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
Stock buyback
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Stock buyback

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  • 1. To return surplus cash to shareholders as an alternative to a higher dividend payment or investing the surplus cash in existing or new operations. 2. Adjust or change the company’s capital structure quickly, say for those companies seeking to increase its debt/equity ratio. 3. To increase earnings per share and net asset value per share as a possible signal to the market place that management is of the view that the prospects of the company justify a market price higher than that currently accorded by the market. 4. To improved the various performance parameters like EPS,DPS, operating cash flow per share, etc. 5. To thwart the attempts of a hostile takeover.
  • Since the P/E multiple in 2005 reached a very high level of 28.68 compared to industry, company decided to buyback shares worth Rs. 3.39 crores at Rs. 21 in Dec 2006This buyback did result in increase in EPS, ROE, ROA and decrease in P/E in 2007 However company could not leverage on this benefit as in 2008 it reported loss due to increase in raw material and other manufacturing expensesIn 2009, company is done extremely well as its EPS, ROE and ROA has increased significantly and also its P/E multiple is in check Also there was a major increase in promoters’ shareholding from 67% to around 74%This buyback was successful
  • The buyback of shares took place in 2006. The company could achieve increase in EPS, ROA and ROE for only one yearAfter 2007, there has been fall in EPS, ROA and ROE ever sinceThe company could not achieve what it desired through the buybackAlso not much change has been observed in shareholding patternThus the buyback was unsuccessful
  • The P/E multiple in 2006 reached a very high level in comparison to industry. Thus the company decided to buyback shares worth Rs. 35 crores at Rs. 250 in June 2006This buyback was completed in Sep 2006. After this EPS, ROE, ROA increased in 2007, but again fell in 2008The benefits could not be sustained. Hence the buyback can be called unsuccessful.
  • The main rationale for buyback was to increase the promoters’ shareholding in the company from 48% to 51%As can be seen, there has been no significant impact of the this buyback on the company’s performance
  • Transcript

    • 1. Presented By
      Pushan Sharma
      Ruchi Gupta
      Sashank Shah
      Stock Buyback
    • 2. INTRODUCTION
      A stock buyback, also known as a "share repurchase", is a company's buying back its shares from the marketplace
    • 3. OBJECTIVES
      To return surplus cash to shareholders as an alternative to a higher dividend payment or investing the surplus cash in existing or new operations. 
      Adjust or change the company’s capital structure quickly 
      To increase earnings per share and net asset value per share
      To improve the various performance parameters like EPS,DPS, operating cash flow per share, etc.
      To thwart the attempts of a hostile takeover.
    • 4. EFFECTS OF BUYBACK
      Effects On The Company
      • Shareholding Pattern Changes
      • 5. Improvement in the Financial ratios of the company
      Effects on the Shareholder
      • Tax Benefits
      • 6. Higher Share Price
    • CASE OF SUCCESSFUL BUYBACK
      GLAXOSMITHKLINE Consumer Healthcare Ltd.
      Sellers of Horlicks, Boost, Crocin, Iodex and many others
      Made an open offer to buyback during March 2005
      Offered to buy 3.3 Mn
      At Rs 370/Share, not exceeding 123 Cr in value
      Represented 23.24% of free reserves
    • 7. REASONS FOR BUYBACK
      Promoters holding would increase from 39.99% to 43.16%
      Had excess reserves with no major expansion plans
      Wanted to use its reserves instead of keeping it idle
      Felt share was undervalued
      FMCG industry in that period had limited growth plans
      Thus Britannia, Godrej and HUL all came with buyback plans
    • 8. SUCCESS OF BUYBACK
      Received more than double the required offers (7.8 Mn)
      Bought back using proportional acceptance method
    • 9. CASE OF UNSUCCESSFUL BUYBACK
      INDIAN RAYON
      Is into the garment business, it is an AV Birla Group Company
      Announced buyback in 1999
      Buyback of 25% equity share capital
      Price offered was in the range Rs 75-85
      Intended cash outflow Rs 127-144 Cr
    • 10. REASONS FOR BUYBACK
      To increase promoters stake from 21.5% to 28.7%
      Working at below capacity and no major Capex planned
      Wanted to add value to share holders by returning capital to them
      Cement business was hived off to Grasim
      Buyback would give investors an exit route
    • 11. LIMITED SUCCESS OF BUYBACK
      Could purchase only 11% of its outstanding shares as against the 25% offered
      Hiked the price on offer to Rs. 85
      Market cap fell from 1397 Cr in 1999 to 455 Cr, 5 years later
      Share price plunged from Rs. 207 to Rs. 67
      Launched at wrong time- Co. was not doing well and markets were crashing
    • 12. EFFECTS OF BUYBACK – KAMA HOLDINGS (Dec 2006)
    • 13. KEY FINDINGS- KAMA HOLDINGS
      Since the P/E multiple in 2005 reached a very high level of 28.68 compared to industry, company decided to buyback shares worth Rs. 3.39 crores at Rs. 21 in Dec 2006
      This buyback did result in increase in EPS, ROE, ROA and decrease in P/E in 2007
      However company could not leverage on this benefit as in 2008 it reported loss due to increase in raw material and other manufacturing expenses
      In 2009, company is done extremely well as its EPS, ROE and ROA has increased significantly and also its P/E multiple is in check
      Also there was a major increase in promoters’ shareholding from 67% to around 74%
      This buyback was successful
    • 14. EFFECTS OF BUYBACK – PRIME SECURITIES (Mar 2006)
    • 15. KEY FINDINGS – PRIME SECURITIES
      The buyback of shares took place in 2006. The company could achieve increase in EPS, ROA and ROE for only one year
      After 2007, there has been fall in EPS, ROA and ROE ever since
      The company could not achieve what it desired through the buyback
      Also not much change has been observed in shareholding pattern
      Thus the buyback was unsuccessful
    • 16. EFFECTS OF BUYBACK – SRF (Sep 2006)
    • 17. KEY FINDINGS – SRF
      The P/E multiple in 2006 reached a very high level in comparison to industry. Thus the company decided to buyback shares worth Rs. 35 crores at Rs. 250 in June 2006
      This buyback was completed in Sep 2006. After this EPS, ROE, ROA increased in 2007, but again fell in 2008
      The benefits could not be sustained. Hence the buyback can be called unsuccessful.
    • 18. EFFECTS OF BUYBACK – REVATHI EQUIPMENTS (Jun 2007)
    • 19. KEY FINDINGS – REVATHI EQUIPMENTS
      Buyback was successful as the EPS, ROA, ROE increased and P/E multiple fell
      Also the promoters’ shareholding in the company increased marginally
    • 20. EFFECTS OF BUYBACK – RIL (Aug 2005)
    • 21. KEY FINDINGS - RIL
      The main rationale for buyback was to increase the promoters’ shareholding in the company from 48% to 51%
      As can be seen, there has been no significant impact of the this buyback on the company’s performance
    • 22. EFFECTS OF BUYBACK – NATCO PHARMA (Jul 2007)
    • 23. KEY FINDINGS – NATCO PHARMA
      The buyback was successful for NATCO as its EPS, ROA, ROE increased after the buyback
    • 24. EFFECTS OF BUYBACK – RELIANCE INFRASTRUCTURE (Jun 05)
    • 25. KEY FINDINGS – RELIANCE INFRASTRUCTURE
      Since the P/E multiple of the company had increased significantly, the company went for buyback
      This helped in reducing P/E along with increase in EPS, ROA and ROE
      Also there was a significant increase in promoters’ shareholding from around 50% to 53%
      Thus the buyback was Successful
    • 26. EFFECTS OF BUYBACK – POLARIS SOFTWARE (Nov 05)
    • 27. KEY FINDINGS – POLARIS SOFTWARE
      The buyback resulted in not much significant increase in EPS, ROA or ROE.
      Just the P/E reduced significantly
      However promoters’ shareholding increased from around 24% to 28%
    • 28. CONCLUSION
      Not all buybacks are successful
      Companies mainly use buybacks to change the shareholding pattern, improve financial ratios or/and increase price of the share
      The timing of the buyback is very crucial. If company is not doing well then the buyback might not succeed
      It is a means of returning excess funds to the shareholders
      Gives the market a signal that promoters believe in the company
      The demand supply dynamics go in favour of the company
    • 29. THANK YOU

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