INTRODUCTUION TO TEAM MEMBERS WRO0308563 ‡ VEDESHWARI. MODY ‡ ISHA . MEHTA ‡ POOJA . NANAVATI WRO0351172 WRO0351169 WRO0362231 ‡ GRISHMA . KESARKAR . DESHPANDE TEAM LEADER WRO0347784 ‡ ARUSHI .

WE ALL TEAM MEMBERS HAVE UNANIMOUSLY AGRRED OVER IT. .REASONS FOR CHOOSING THE TOPIC * DURING THE COURSE . SO TO GIVE A CONCISE AND BRIEF KNOWLEDGE ABOUT THE TOPIC . *MOST OF THE COMMON PEOPLE ARE NOT VERY WELL ACQUAINTED WITH TERM . WE HAVE CHOSEN IT. *BUY BACK OF SHARES IS SOMETHING WE SHOULD HAVE KNOWLEDGE ABOUT SO WE CAN UNDESTAND THE FINANCIAL IMPLICATION OF THE COMPANY . OF TRADING AND COMMERCE WE MAY MANY A TIMES COME ACROSS THE TERM ´BUY BACK OF SHARESµ. *HENCE.

and buyback provisions and practices prevailing in other parts of the world. accounting and reporting aspects of buyback. including a comprehensive review of the theory underlying buyback operations. It examines a number of relevant issues concerning buyback of shares by companies in India. . legislative provisions governing share buyback.History of Buy-Back In late 1996-1999 Indian share market did not move . People hesistated to buy and people were not intereted in selling shares as they felt that share market might go up. Introduction of buyback in the corporate sector of India has found favor with the regulatory authorities and received favorable response from the Indian companies.

 Companies may also buy back shares to pay for acquisitions that are financed with stock swaps or to make stocks available for employee stock option plans. .WHAT IS BUY BACK OF SHARES ? The repurchase of outstanding shares (repurchase) by a company to reduce the number of shares outstanding in the market is known as ´BUY BACK OF SHARESµ.  The companies buy back shares either to increase the value of available shares (reducing supply) or to eliminate threats by shareholders who may be planning a hostile takeover.

The shares bought back should be extinguished and physically destroyed. A special resolution in the general meeting of the company The buy back is or less 25% of total paid capital and free reserves. All the securities bought back are fully paid ² up. . A declaration of solvency should be filed with ROC( registrar of company) and SEBI (securities exchange board of India). The debt-equity ratio after the buy back should not be more then twice the capital and free reserves . The buy back of unlisted securities should be as per central government guidelines .LEGAL ASPECTS OF BUY BACK (section 77) A COMPANY CAN PURCHASE ITS OWN SHARES ONLY IF The buy back is authorized by its articles .

*From open market . *From odd lot holders . The shares bought back should be extinguished and physically destroyed. *Going for ´ESOPµ or ´SWEAT EQUITYµ. No further issue of securities of the same kind shall be made within 6 months expect by *bonus issue * Conversion of warrant. . Buy-back shall be permissible *From existing share holder on proportionate basis. A declaration of solvency should be filed with ROC( registrar of company) and SEBI (securities exchange board of India). *´SWEAT EQUITYµ *Conversions of preference shares/debentures to equity shares .The buy back of unlisted securities should be as per central government guidelines .

CLASS OF SECURITES INTENED TO BE PURCHASED UNDER THE BUY ² BACK AMOUNT TO BE INVESTED TIME LIMIT FOR THE COMPLETEION OF THE BUY ² BACK .PROCEDURES BEFORE BUY BACK :THE NOTICE OF THE MEETING AT WHICH THE SPECIAL RESOLUTION IS TO BE PASSED SHALL BE ACCOMPANIED BY  COMPLETE DISCLOSURE OF ALL AMTERIAL FACTS .  NECESSITY FOR THE BUY.BACK .

METHODS OF BUY-BACK OF SHARES:I. . V. SELECTIVE BUY-BACK. VI. ESOP(EMLPLOYEE STOCK OPTION ) REPURCHASE. FIXED PRICE TENDER OFFER III. OPEN MARKET SHARE PURCHASE II. EQUAL ACCESS BUY-BACK. DUTCH AUCTION SHARE REPURCHASE IV.

SECURITES PREMUIM iii. THE BUY BACK IS NOT ALLOWED OUT OF PROCEEDS OF AN OTHER ISSUE OF SAME KIND OF SHARES OR SPECIFIED SECURITIES . FREE RESERVES . NOTE:HOWEVER.BACK IS OUT FREE RESERVES SUM EQUAL TO NOMINAL VALUE OF SHARES ABOUGHT BACK SHALL BE TRANSFERRED TO CAPITAL REDEMPTION RESERVE ACCOUNT. IF BUY. ii. . THE PROCEEDS OF ANY SHARES OTHER SPECIFIED SECURITIES.SOURCES OF FUNDS FOR BUY-BACK OF SHARES:i.

The company shall within 2 days of the completion of buyback issue a Public Advertisement in National Daily. interalia. The verification of shares received in Buy-Back shall be completed within 15 days of closure of the offer and payments made within 7 days. .Buy-Back offer shall remain open for not less than 15 days and not more than 30 days. ii. iii. disclosingNo of shares bought Price at which bought Total amount investment in Buy-Back Details of Shareholders from whom shares exceeding 1% of total shares bought back The consequent changes in Capital Structure i.

the EPS (EPS is calculated by dividing net profit by outstanding shares) may look good. as it increases Earning Per Share. To make the Stock more attractive for the long-term investors. The ROA (Return on Asset) and ROE (Return on Equity) may improve by fall in outstanding shares and assets (in this scenario. excess cash). . 3.Advantages to Share-Holders of Buy-Back 1. As buy back of shares reduces outstanding shares. Share holders will have a greater degree of flexibility in how they record this gain and can manage their taxes better. may increase the stock price in share market. 2. 4. Buy back at good premium.

the purchases of its stock at inflated prices came when the Cash Flow was being squeezed by the weak PC Market. the result is increased risk for the firm because of the reduced equity in the firm·s capital structure. Unfortunately for Dell. There are many growing companies which are facing the risks because of BUYING-BACK of shares. According to SEC filing. . dell had issued put contracts on 96 millions of its own shares at an average exercise price of $44 per share.RISK Regardless the purpose of the BUY-BACK. the company was forced to repurchase its some of the shares for $47 at a time the stock was trading for the Nasdaq National Market. Following is the Case Study of Dell Computers Case StudyDuring 2001. because the company had earlier sold put options with strike prices that on the issued date seemed reasonable but later turned out to be substantially higher than the price at which stock traded in the depressed market. The company was required to pay the twice of the market price to repurchase its shares.

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50000 or woth both .Conclusion :The buy-back had sight impact on the fundamentals of the economy or the company . . Penalty :If a company makes a default in complianing with the provisions of the section or any rules and regualtions made .the company or any officer of the company who is in default shall be punishable with imprisonment fir a term which may extend for 2 years or with fine which may extend to Rs.

BIBLOGRAPHY:I. JAYARAMAN V.(ICAI) II. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA .WIKIPEDIA .SHRI L . JKSC LAW BOOK . COM IV.COM III.GOOGLE.

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