Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

5 things to know about share buyback plans

974 views

Published on

Whether you’re a shareholder or not, here are 5 important things you should know about buybacks

Published in: Economy & Finance
  • Be the first to comment

5 things to know about share buyback plans

  1. 1. 5 things to know about share buyback plans
  2. 2. Some of the biggest companies in the IT sector- Cognizant, and TCS – have offered a buyback of shares from their shareholders. And the latest news suggests that Infosys may follow the same path set by its competitors. So, why have buybacks become so popular? Read on to find out 5 important things you should know about buybacks whether you are a shareholder of these companies or not.
  3. 3. So what about these buybacks? The Cognizant board recently approved a plan to return $3.4 billion (Rs 22,725 crore*) to its shareholders. They wish to do this over the next two years through buybacks and dividends. Following this announcement, TCS came out with a buyback offer of Rs 16,000 crore. And with a buyback offer of Rs 17,000 crore, Infosys is not to be ignored. *$1 = Rs 66.84. #1
  4. 4. Reason for these buybacks Buybacks have been on the rise in recent times. But in India, the trend has gathered steam especially after Budget 2016-17. The Dividend Distribution Tax (DDT) imposed by the government could be a big reason. Investors have to pay 10% DDT if their dividend income exceeds Rs 10 lakh per annum. #2
  5. 5. Why they matter to investors Buybacks are a common way for companies to distribute excess cash to shareholders. For existing shareholders, buybacks are often good news. They reduce the supply of shares in the market. This ensures that the earnings per share increases for shareholders. #3
  6. 6. Should you participate in the buyback? Participate in the buyback only if it is profitable to you. Take note of the offer price before you commit to the buyback. This is because you only gain if the offer price is significantly higher than the market price. In addition, the quantum of money you receive should be substantial too. For instance, only three out of 100 shares are accepted for buyback by TCS. #4
  7. 7. Key takeaways Companies generally opt for buybacks when they have surplus cash. TCS has a cash pile of around Rs 38,000 crore as of 31 December 2016, as per a report by The Hindu. This could also be an indication of a lack of growth opportunities for the company. For investors, buybacks are most attractive when it occurs at a premium over market price and the quantity of buyback is big. #5
  8. 8. To conclude: For investors, a buyback can sometimes mean a big downpour of cash. So make sure you make a substantial profit when you sell your shares.
  9. 9. Disclaimer: Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com / www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSEI INE 260808130/INB 260808135/INF 260808135, AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL- 23-97. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 6825, or Email: ks.compliance@kotak.com. In case you require any clarification or have any concern, kindly write to us at below email ids: • Level 1: For Trading related queries, contact our customer service at ‘service.securities@kotak.com’ and for demat account related queries contact us at ks.demat@kotak.com or call us on: 30305757 (by using your city STD code as a prefix) or Toll free numbers 18002099191 / 1800222299 and 18002099292. • Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on 022-42858445 and if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208. • Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Name: Manoj Agarwal) at ks.compliance@kotak.com or call on 91- (022) 4285 8484. • Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at ceo.ks@kotak.com or call on 91-(022) 4285 8301. This is an editorial content, our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile, and the like and take professional advice before investing.

×