CHAPTER 1

INTRODUCTION
As a method of distributing cash to investors, stock repurchases have grown rapidly
(relative to dividends) in the past decade Over the past few years, many firms have
announced significant number of stock repurchases. The overwhelming reason given for
stock repurchase announcements has been to reverse a trend of declining stock prices.
Therefore Share buy backs have become an important area in financial research
considering its strong implications for corporate policy

Although not obligated, firms can voluntarily state the reasons for a share repurchase at
the time the announcement is made, one of the main reasons being undervaluation. While
undervaluation is well recognized as an important motivational factor in a firm’s
repurchase of its shares, management is not expected, or indeed required, to provide the
true reasons for a share repurchase. The resultant question would be as to who benefits
from buy back the investor who Tenders their shares or the company, which announces
the buyback or both. The study therefore examines the wealth creation aspects of a buy
back.

In India the practice share buy back started off in 1998 with SEBI clearance, bringing
benefits to all stake holders i.e. both the company and the public (share holders) .The
main purpose of the company going for buy back is to increase the undervalued share
price, prevent from hostile takeover, to maintain a good capital structure and showing a
positive signal to the market about the future prospects of the company.

1.1 OBJECTIVE OF THE STUDY

The object of this study is to assess the emerging trends of share buyback activity in
India & try to answer the following questions that generally are asked about them.

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 • Will Share buyback really benefit shareholders?
• Are regulations for share buybacks adequate?
• In what way can it be misused by those in control of the company?
• What is the impact of Share buyback Announcement on the Share prices?
• What is the significance of share buyback on company’s operational efficiency?

1.2 THE MEANING OF SHARE BUYBACKS

A share buyback is nothing but a company buying back its shares from the marketplace.
Buyback can be thought as a company investing in itself.
With the extra cash in hand, the company can use it to buy its own shares. The company
leading to reduce number of outstanding shares in the market absorbs these shares. When
this happens, the ownership of each investor increases because there are fewer shares left
outstanding on the market.
Companies will buy back shares either to increase the value of shares still available
(reducing supply), or to eliminate any threats by shareholders who may be looking for a
controlling stake. Share buybacks are also known as Stock Repurchases.

1.3 AN OVERVIEW OF BUYBACK ACTIVITY IN INDIA

Fig 1: No. Of Companies offering shares for buybacks

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1.4 GENESIS OF SHARE BUYBACK

When share buyback by companies was permitted in 1998, it appeared from the lobbying
pressure of Indian business houses that a large number of companies were waiting in the
wings to buyback their shares.,

However Share buyback activity in India has remained very low, much below the
expectations at the time when share buyback was introduced. Except for the two years,
2001-02 and 2002-03, the number of listed companies announcing share buybacks in a
year has barely touched the figure of 20.

In terms of percentage of total number of listed companies in India, not even one per
cent of them come out with buyback offers in a year. The number of share buybacks,
instead of growing steadily, has, in fact, dwindled after the year 2002-03 which was a
sort of peak year for buyback activity. Lately we have seen a splurge in the buyback
activity in the financial year 2008 – 2009 owing to the recessionary impact, which has
made the scrip’s hit their bottom levels.

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1.5 PERIOD-WISE ANALYSIS

First buyback - The first share buyback offer in India was made in March 1999. The
next buyback offers during the next year 2000-01.

The small number of actual buybacks may have been the reason, which led the
government to relax the rules, especially in view of the sagging market situation created
in the aftermath of the stock market crisis of March 2001. The relaxation of share
buyback rules in October 2001 gave a Temporary fillip to share buyback activity, raising
the number of Buyback offers to 60 during the fiscal year 2001-02 and to 79 during
2002-03. However, the subsequent period has witnessed a substantial decline in share
buyback activity, as indicated by the number of buyback announcements.

1.6 METHODS OF BUYBACK

Typically, buybacks are carried out in one of two ways:

1. Tender offer

Shareholders may be presented with a tender offer by the company to tender a portion or
all of their shares within a certain time frame. The tender offer has the number of shares
the company is looking to repurchase and the price they are willing to pay for them. The
price is almost always at a higher price than the market price. When investors take up the
offer, they will state the number of shares they want to tender along with the price they
are willing to accept. Once the company has received all of the offers, it will find the
right mix to buy the shares at the lowest cost.

2. Open market through stock exchanges

The second alternative a company has is to buy shares on the open market, just like an
individual investor would, at the market price subject to various regulatory guidelines of

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SEBI. Shareholders are invited to sell some or all of their shares within a set price range.
The low point of the range is at a discount to the market price, while the top of the price
range is set at a premium to the market price.

OTHER METHODS OF BUYBACK

1. Book Building Process

Companies can also use the book building process to buy back shares. The book building
process is a mechanism of price discovery, which helps determine market price of
securities. If the book building option is used, a draft prospectus has to be filed with
SEBI. The prospectus should contain all the details of the offer, except the price at which
the securities will be offered (a price band is specified). The copy of the draft prospectus
is filed with SEBI and is circulated among institutional buyers by a leading merchant
banker acting as the book runner. Institutional investors specify the price as well as the
volume of shares they intend to buy. The book runner, on receiving the above
information, determines the price at which the offer is to be made to the public.

2. From odd lots

Shares of a listed company are issued in the marketable lots, i.e., in a batch of 100 shares.
Any shares less than the marketable lot is 'odd lot'. However, with the introduction of de-
materialization (Demat) of shares, the concept of odd lot share does not exist as far as
dematerialized shares are concerned. It has applicability with respect to shares held in
physical form

3. Employees’ shares issued either as stock option or sweat equity

Sweat Equity Shares are not regular equity shares in as much as sweat equity is issued
only to key employees and directors. Sweat Equity Shares are issued at discount or for
consideration other than cash for providing know-how or making available intellectual
property rights or any value additions. The Act does not make any distinction between
listed companies, unlisted public companies and private companies

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1.7 TENDER VS. OPEN OFFER - Which method fares better?

Companies have majorly two methods for going in for a buyback. It depends upon the
management of the company that whether it takes Tender Offer or Open Market Through
stock exchanges. Shareholders have their own preference for a particular method.
Therefore we have to look from both Shareholders & Companies point of view that
which method they would prefer.

Shareholders point of view – They have a preference for TENDER OFFER

because of the following reasons

 Fixed Price –: Since there is a fixed price on offer therefore the

shareholders know how much price they will get

 Arbitrage Opportunity: In tender offer, shareholders are given a fixed

price. The shareholder needs to sell the stock to the company within a 15-day
specified period. "There is an arbitrage opportunity for the shareholder when a
company pursues the tender process of buyback

Company’s point of view - They have a preference for open market through
stock exchanges method because of the following reasons

 Commitment of Funds: The biggest advantage of an open market

buyback is that there is no obligation on the part of the company to buy back
shares, even if the stock consistently trades below the maximum price fixed for
buyback. This ensures that there is no need for company to commit funds for the
buyback programme.

 Time Period: the open market route will offer the flexibility to keep the
buyback window open for a long period of time whereas in a tender offer, the
Company will have a three-month window, at the most.

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1.8 MOTIVES BEHIND SHARE BUYBACKS IN INDIA

So why does a company decide to buyback? There are many reasons for a company to go
in for a buyback some are stated clearly and some are not mentioned explicitly in
buyback announcements but of these reasons is very strong for the company and makes
them towards BUYBACK as an option. The reasons for the Buyback are discussed
below:

1. Build Investor Faith: when a company announces a buyback the market as a positive
thing, which often causes the share price to shoot up, usually perceives it. This in turn is
good for the investors and eventually what the company's management wants for their
investors.

2. Discount Recovery: When the company feels the market has discounted its share
price too steeply, they try to revive it by buyback. By buying back its own shares, the
company sends out a positive signal to the market that the stock price has gone too far in
discount.

3. Improve Financial Ratios: A company might pursue a buyback solely to improve its
financial ratios, which the investors and traders heavily focus upon. This definitely is a
questionable motive. If reducing the number of shares is not done in an attempt to create
more value for shareholders but rather make financial ratios look better, there is likely to
be a problem with the company's management.

4. Returning surplus cash: Returning surplus cash to the shareholders serves the
interest of the shareholders as well as that of the broader national economy by promoting
better utilization of the available capital funds. Continuing to hold such surplus cash pulls
down the company’s rate of return on total assets and ultimately the shareholder value.
Giving it back to the shareholders through share buyback will allow the shareholders to
invest this idle capital more profitably

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5. Reduce Dilution: A company might pursue a buyback to reduce the dilution that is
often caused by generous employee stock option plans. Stock options have the opposite
effect of buyback, as they increase the number of outstanding shares when the options are
exercised, which affects financial ratios such as EPS, P/E and ROA.

6. Illiquid shares and odd-lot holders- An objective of share buyback in India is “to
provide an exit roué to shareholders in the case of listed shares which are hardly traded.
This is very peculiar to India because a very high percentage of listed shares are not
traded for long periods. Our examination of buyback offer documents shows that some
companies have cited lack of liquidity of their shares in the market as a reason behind
share buybacks. Such buybacks provide an exit route to those shareholders who are not
able to sell their shares in the market at a fair value. Since the buyback price is generally
higher than the prevailing market price the shareholders are able to liquidate their shares
which otherwise are seldom traded in the market.

7. Strengthening the promoter’s voting power: A buyback motive which is never

mentioned explicitly in buyback announcements is the promoters’ desire to strengthen
their voting control over the company without having to spend their own money.

8. Earnings Management: Managers who have the inside information and control the
share holding can opportunistically use share repurchases for window-dressing purposes.
A number of studies show that repurchasing of shares employed by companies
experiencing operating slowdowns as a means to disguise poor results with respect to
performance indicators like EPS

9. Share buyback vs. dividend: One important consideration for companies in India,
while choosing between the share buyback form and the dividend form of distributing
surplus cash to shareholders is the question of “dividend policy”. Usually, share buyback
is an occasional event and not an annual event. On the other hand, dividend is an annual
event, which is watched, with bated breath by shareholders and the whole market and
which is likely to affect the valuation of the company’s shares much more than share

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buyback. Regular dividends are valued much more than irregular dividends. A cut in
dividend, or failure to maintain the dividend or to meet the market’s anticipations in this
regard, can affect the company’s image adversely. Hence, it is normally better to return
surplus cash through share buybacks rather than by disturbing the dividend policy.

If surplus cash is distributed as extra one-time special dividend, it should be made very
clear in the communication to shareholders. It should not create unreasonable
expectations about future. A muddled dividend policy could be damaging to the
company’s image. From this viewpoint, share buybacks provide a more flexible
mechanism than dividends for distributing the accumulated and unwanted surplus cash

1.9 VALUATION OF BUYBACK PRICE

There are two ways companies determine the buyback price.

METHOD 1
Use of average closing price - They use the average closing price (which is a weighted
average for volume) for a period immediately before to the buyback announcement.
Based On the trend and value a buyback price is decided. Based on the trend and value
Buyback price is decided

METHOD 2
Setting a price range - In the 2nd method, shareholders are invited to sell some or all of
their shares within a set price range. The low point of the range is at a discount to the
market price, while the top of the price range is set at a premium to the market price.
Investors are given more say in the buyback price than in the above arrangement. Still

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this method is rarely used. Generally, the price is fixed at a mark up over and above the
average price of the last 12-18 months.

CHAPTER 2
RESEARCH METHODOLOGY

2.1 RESEARCH DESIGN

We have taken 2 methods of Buyback which are Tender Offer & Open Market
through Stock Exchanges as these are the most common method which are used for
share buybacks and other methods are used very seldom by the companies and hence are
not taken into account

2.2 SAMPLE SIZE

The sample size consists of 35 companies, which have made share buyback
announcements.

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Our analysis covers all buyback announcements made by Indian companies from 2004
up to May 2008, for which data could be accessed

2.3 SOURCES OF DATA COLLECTION

Secondary Data Collection
Through websites, journals, magazines & books
NOTE: All the preliminary data for selecting the companies has been taken from the
site” http://www.sebi.gov.in/“ and data for 2008 has been taken up to April 31st as for
analyzing the operational efficiency of companies we needed 1 year data and companies
that announced buyback after 31st April would not have this data

CHAPTER 3
ANALYSIS

After having an initial idea of what is Share Buyback, what are the motives of Buyback;
and the different Methods of Buyback followed by companies? Now we come to the part
of analyzing what is the actual effect of Share Buyback on Companies. Therefore as
mentioned earlier we have taken up 35 companies for our research study in which 28
companies have announced Buyback using Open Market through stock exchanges
method and 7 companies using Tender Offer method. Now the rest of the study will
cover the effect of Share Buyback on these companies, which will be analyzed through
effect on various parameters.

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 3.1 COMPANIES & THEIR INITIAL BUYBACK INFORMATION
Basic Reference Data

The data compiled in a tabular format below has been the basis for carrying out further
analysis.

TABLE 1 Dates for consideration for Share buyback

S.No Name of the company Announcement date Opening Date Closing Date Mode of buyback
TENDER OFFER
1 Adf Foods Limited 07/01/ 2004 06/02/04 05/03/04
2 Avery India Ltd 15/03/ 2004 16/04/04 5/5/04 TENDER OFFER
3 Apollo Fin vest (I) Ltd 07/01/05 01/03/05 30/03/05 TENDER OFFER
GlaxoSmithKline TENDER OFFER
Consumer Healthcare
4 Ltd 10/03/05 14/03/2005 12/04/05
Apollo Fin vest (India) TENDER OFFER
5 Limited 25/10/07 17/12/07 02/01/2008
6 Gtl India Ltd 13/08/07 05/10/07 19/10/07 TENDER OFFER
7 Abbott India Limited 06/03/07 07/03 /07 22/03/07 TENDER OFFER
8 Mastek Limited 25/05/04 27/05 /04 16/05 /05 OMTSE
Britannia Industries OMTSE
9 Ltd 07/06/04 17/06/04 07/07/04
Reliance Energy OMT
10 Limited 16-Jun-04 21-Jun-04 08/07/04 SE
Reliance Industries OMTSE
11 Limited Dec 31, 2004 10-Jan-05 26-Dec-05
12 Etc Networks Ltd 16-May-05 18-May-05 20-Apr-06 OMTSE
March 19 - OMTSE
13 Aegis Logistics Ltd Mar 16, 2005 2005 Mar 03- 2006
14 Dil Ltd Apr 08, 2005 13-Apr-05 16-Mar-06 OMTSE
Polaris Software Lab OMTSE
15 Ltd May 03, 2005 27-Apr-05
Berger Paints India OMTSE
16 Limited May 13, 2005 18 May, 2005 28 April, 2006
Godrej Consumer OMTSE
17 Products May 18, 2005 23-May-05 9-May-06
Indiabulls Financial OMTSE
18 Ser Ltd Nov 22, 2005
19th OMTSE
December, 7th December,
19 Srf Polymers Ltd Dec 13, 2005 2005 2006
June - 22 - OMTSE
20 Srf Limited Jun 27, 2006 july 3 2006 2007
Carol Info Services OMTSE
21 Limited Jul 24, 2006 28-Jul-06 28-Jun-07
22 Etc Networks Limited Aug 29, 2006 4-Sep-06 23-Apr-07 OMTSE

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23 Natco Pharma Limited Sep 06, 2006 12-Sep-06 30.07.2007 OMTSE
Carol Info Services OMTSE
24 Limited Sep 15, 2006 19-Sep-06 26-Jun-07
25 Ici India Limited Sep 25, 2006 29-Sep-06 13-Sep-07 OMTSE
Hindustan Unilever OMTSE
26 Limited Sep 26, 2007 3-Oct-07 13-Sep-08
27 Mro-Tek Limited May 11, 2007 21.05.2007 29-Mar-08 OMTSE
28 Ace Software Limited Apr 27, 2007 30-Apr-07 28-Sep-07 OMTSE
Gujarat Ambuja OMTSE
29 Exports Limited Apr 09, 2007 16-Apr-07 15-Jan-08
Srf Limited - Public OMTSE
30 Notice Apr 29, 2008
Sasken Technologies OMTSE
31 Limited Apr 22 2008 5-May-08 17-Apr-09
26th OMTSE
April 28, November,
32 Mastek Limited - Apr 17 2008 2008* 2008
Patni Computer 14th April 6th February OMTSE
33 Systems Limited Apr 15, 2008 2008 2009
Madras Cements OMTSE
34 Limited Apr 10, 2008 Feb 18 2008 Jan 30 2009
Reliance Energy OMTSE
35 Limited Mar 12 2008

# OMTSE - Open Market through Stock Exchanges

3.1.1 Mode opted for buyback

From the data amassed above we have found out an analysis for the method which the
companies have taken for carrying out their process of share buyback.

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Findings: Out of the sample of 35 companies that we had taken we found that companies
had shown a preference for open market method over Tender offer as has been described
earlier . In 2007 – 2008, 14 companies had announced Buyback through Tender offer
whereas only 2 had done through Open market whereas this trend reversed altogether in
2008- 2009 where 7 companies announced as compared to a staggering increase of
1800% for the Open Market offer which took its taly to 36.

3.1.2 Industrial & Market capitalization classification

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Carrying out industrial & market capitalization classification was necessary so as to find
a trend that which is the sector or industry and what is the size of companies which prefer
Share buyback as a method for distributing cash to investors.

Findings: While examining the type of industries with buyback offers over the 4-year
study period no particular pattern of industry clusters in a particular year was apparent.
IT (tech) industry for instance with highest percentage of offers are almost evenly spread
across the 4 years.
Since industry distribution had no specific pattern in a particular year examining either
the firm level or industry factors that may have triggered a buyback was not considered.
The year that had maximum number of buybacks was in the year of 2008. The major type
of industries that had announced buyback were Fmcg, Capital Goods, Banking &
Financial Services , Health& Pharmaceuticals, It ( Tech), Logistics, Consumer
Durables , Miscellaneous & Diversified, Power ,Oil& Gas ,Media &
Entertainment,& Telecommunication Services

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3.1.3 Market Capitalization Classification

Assumption - Taken according to BSE small cap, BSE mid cap & BSE– 500 indexes.

3.2 CONTENTIONS FOR BUYBACK: IS BUYBACK THE RIGHT

STRATEGY

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First & foremost issue is to address that was BUYBACK the right strategy for the
companies who actually had gone for buyback? Buyback route can be undertaken by
companies which are financially sound or which have limited promoters’ stake or those
facing takeover threats. Internationally it has been observed that companies have opted
for buyback in times when they believed that shares were undervalued in the market or
they had surplus cash in their treasury. Companies with consistently high ROCE are
likely to have more cash than others. They can Buyback by even borrowing as it makes
sense for them to swap equity for debt, resulting into higher Return on Net Worth.

Lower the price to book value ratio, lower the promoters stake, higher the ROCE, lowers
the DEBT – EQUITY ratio or higher the CURRENT RATIO higher is the chances for
the company to go for the BUYBACK
Now we will analyze our sample companies on the parameters of Roce, Promoters
Stake, Debt – Equity Ratio, Price To /Book Value Ratio as on the date of their
Announcement of buybacks.

3.2.1 Return on Capital Employed - Return on capital employed establishes the

relationship between the profit and the capital employed. It indicates the percentage of
return on capital employed in the business and it can be used to show the overall
profitability and efficiency of the business

Calculated as:
ROCE = EBIT/Total Assets- Current Liabilities

The above explanation for ROCE leads us to the result that higher the ROCE ratio,
higher is the chances for companies to go in for a buyback. Now as per standards an
ROCE above 5 is considered to be adequate and ROCE above 10 is considered very well

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Findings: In the table below we can see that out of the 35 companies that we have taken,
20 companies have an ROCE above 10 & 8 companies have a Roce above 5 thereby
conforming our initial hypothesis that companies with high Roce go in for buyback

3.2.2 Price to Book Value Ratio

The price/book value ratio is the ratio of the market value of equity to the book value of
equity, i.e., the measure of shareholders’ equity in the balance sheet. Also known as the
“Price-equity ratio".

Calculated as:

A lower P/B ratio could mean that the stock is undervalued hence we see that company
buying back a large number of shares will have a lower book value as this indicates that
its shares is undervalued

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Findings: Although the P/BV ratio varies from industry to industry but if we take an
average P/BV for all industries at 3. Out of the 35 companies a whopping 29 companies
that is close to 83% of the companies have average P/BV less than it thereby making
them the perfect candidate for going in for a buyback

3.2.3 Debt /Equity Ratio: Debt to Equity Ratio is also referred to as Debt Ratio,
Financial Leverage Ratio or Leverage Ratio

Calculated as:
Debt to Equity Ratio = Short Term Debt + Long Term Debt
Total Shareholders Equity
The debt to equity (debt or financial leverage) ratio indicates the extent to which the
business relies on debt financing. Upper acceptable limit of the debt to equity (debt or
financial leverage) ratio is usually 2:1, with no more than one-third of debt in long
term.

A high financial leverage or debt to equity ratio indicates possible difficulty in paying
interest and principal while obtaining more funding. Therefore Companies having a
low debt to equity ratio will go in for a buyback as there interest obligations would be
low and they would have idle cash with them to go in for such a Buyback

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Findings: We find that 31% of the companies taken have no debt and 40 % of the
companies have a D/E ratio of less than .5 thereby conforming our view that those
companies that have no debt or low debt go for the buyback as low Debt ultimately
catapults to low interest obligations.

3.2.4 Promoter’s Stake. A buyback increases the promoter’s stake in his company.
When a buyback is announced, one should have a look at the stake of the promoter and
his associates in the company, before and after the buyback (assuming the offer is fully
subscribed).

Cash-rich companies where the promoters have a low holding and are keen to increase
their stake could well make further buyback offers at a later date–often, at a higher price.
There are many old economy companies that fit this profile

After the buyback, the promoters’ stake will increase as they are not allowed to
participate in the process as per the SEBI guidelines. “The money used to buy back
shares belongs to the company, not the promoters. So promoters end up increasing the
stake without spending any money,”

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Findings: In this regard we see that out of our universe of 35 companies 24 companies
have a promoter’s stake between 30 to 60 % .This 30 to 60 % range accounts for the low
promoter’s stake that promoters have in their respective companies and that is why they
have gone in for a BUYBACK.

3.3 RESPONSE TO BUYBACK OFFERS

3.3.1 Acceptance of Buyback

The success of a buyback programme is inversely proportional to the no of shares bought

back. If the shares have not been bought back, the buyback programme will be seen as
most successful as it achieved the objective of lending stability to the scrip. On the other
hand, if the entire number of shares is bought back, it will imply that the buyback
programme was unsuccessful in imparting confidence to the investors. However, most of
the sample buyback announcements have received a positive response from the market
indicating that the shareholders and investors did not have faith in the ability of the
company’s management.

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The very first reason of a positive response for a share buyback among investors is that
the buyback is generally done at a premium to the prevailing market price. Most
shareholders believe that promoters will rarely buyback shares, except to protect their
own interest or to put a stop to a takeover.

Second some companies may buyback their shares over though they are overvalued.
Doing so will result in a transfer of wealth from shareholders who do not sell their shares
to the company at the over valued price to the shareholders who do so. There is also fear
that promoters can misuse the process to prop up the market price of their shares for their
personal benefit.

Acceptance of Buyback

Acceptance of buyback Buybacks through Buybacks through Open

programme Tender Offers Market Offers

(Actual as % of
authorized
No. of % of No. of % of
companies companies companies Companies
Announced but not NIL 6 21%
executed or less than 10
%
10 TO 25% NIL 0% 4 14%
Above 25% up to 50% NIL 0% NIL 0%
Above 50% up to 75% NIL 0% 1 4%
Above 75% 7 100% 17 61%
TOTAL 7 100% 28 100%

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Findings: We have found that in all the tender offer cases the market has given it a very
favorable response buy completely buying it back. This is due to the fact that in Tender
offer cases the shareholder knows the price at which the no shares is going to be bought
back and there is an obligation to buyback the shares unlike in open market where there
is no obligation from the companies side to buyback the shares and there is a cap on the
maximum price but not the minimum price which sets in a fear in the mind of the
shareholder that eventually the company could buyback at a very low price, much lower
than the market price of the share which ultimately hurts the shareholder

We have taken only the analysis of Open market through stock exchanges as for Tender
offers all announcements have had 100% response.

3.3.2 Hollow Buyback (A Special Case)

Out of our universe of 35 companies we found that there were 6 companies which
announced their buyback programmes but could not execute it. These were as follows:
Reliance Energy Limited
Polaris Software Lab Ltd
Srf Polymers Ltd
Reliance Industries Limited

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Berger Paints India Limited
Srf Limited

Although these companies had sufficient cash in their kitty but they did not complete the
buyback. One of the prime reasons for not completing a buyback which is never stated by
the company can be a false buyback announcement or hollow buyback

What is a Hollow Buyback?

Several companies announce large-sized buyback offers via open market purchases,
apparently without intending to honor them. The mere announcement of a buyback offer
is often good enough to bolster the company’s stock price.

This is because short-sellers back off; thinking company purchases will avert any steep
slide in the stock price, and thus limit profits from short sales. Many undecided sellers
will hold on to their shares, preferring to sell when prices rise later, and fresh investors
too will step in to buy, expecting the stock to be re-rated because of the improvement in
earning ratios.
Once the share price stabilizes or firms up, promoters may choose not to buy any shares
at all, or may just spend a fraction of the money mentioned in the original
announcement.

Findings: In all of the above cases we found that companies did not intend to buy the
shares and the announcement of buyback was merely done to jack up the share prices.

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3.4 SHARE PRICE MOVEMENT AFTER BUYBACK ANNOUNCEMENT
3.4.1 Objective for analysis
How buyback of shares by a company affects the market price of its shares is a question
which is of wide interest and about which there are few studies in India. In theory, the
effect of share buyback on share price is supposed to be positive but it is not so in all
cases Buyback offers usually remain open for a specified period which could be as short
as 15 days in the case of tender offers and as long as one year in the case of open market
offers. The most relevant period for analyzing the buyback effect will have to be
determined.

In any period, the share price movement is the result of many factors. We shall attempt to
isolate the effect of share buyback from that of other factors. We have distinguished
between:

(i) Announcement effect.

&
(ii) Actual post buyback effect

Announcement effect – It is the effect produced immediately after the buyback decision
is made known to the public through an announcement.

Actual post-buyback effect - It refers to the effect after the buyback programme has
been completed. Thus, in each case of share buyback, information has to be collected
about the relevant dates and the share prices on those specific dates.

Tender Offer
Announcement effect
• The market price prevailing on the announcement date with one week
average closing price
• On the announcement date and when the tender offer closes

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Actual Post-Buyback Effect
• The market price prevailing on the announcement date with three
month average closing price
Open Market through Stock Exchanges
Announcement effect
• The market price prevailing on the announcement date with one month
average closing price

Actual Post-Buyback Effect

• The market price prevailing on the announcement date with 3 month
average closing price
• The market price prevailing on the announcement date with one year
average closing price
Note in both these methods % change is analyzed

3.4.2 Changes for Tender Offer method analyzed

There are 7 companies that we have analyzed for Tender Offer. Out of this 5 companies
have shown an improvement in the share prices for over a week

NOTE –For comparison we have taken the closing price of that particular share on the
Announcement Date with the average closing price for a week that is 5 Trading
Sessions.

26
Weekly Change in prices for Tender Offer

Findings: We Can see that in the first week of the announcement of share buyback
announcement there is a positive response to the share price movement by most of the
companies. These findings confirm our view that there exists an initial euphoria over the
announcement of share buyback which leads to a spurt in share prices of the scrips of
firms who have made these buyback annoncements

3.4.3 Monthly change in prices for Tender Offer

27
Findings: The above analysis shows that since the tender offer is open for only 1 month
maximum therefore it has no clear cut effect on the share price movement which is
substantiated by the above figure.

3.4.4 Month change in prices for Tender Offer

Findings: In the above pie chart almost 50 % of the companies show a decrease in share
price which is contrary to the hypothesis which we have earlier stated that “buyback
announcement should actually lead to an increase in price of the scrip”

Conclusion: This analysis shows that the buyback announcement is seen only for a very
short period of time and after the initial euphoria is over once again the market
fundamentals come into play.

28
3.4.5 Changes for Open Market method analyzed

Month price movement for Open Market method

We analyze the movement of share price for three months, as BUYBACK under this
method is open for a long duration generally close to 1 year

FINDINGS – We find that the announcement of the buyback through the open market
has a considerable effect on share price movement as is evident by the graph above in
which 5 companies out of the universe of 35 companies that is a 15% show an upward
movement of price to the tune of greater than 15 %

29
3.4.6 Year price movement for Open Market method

Findings: The analysis of the above figure shows that a 1 year time period even for the
open market method is not the only criterion for the MOVEMENT OF THE SHARE
PRICE.
Conclusion: There are more fundamental factors in the market that come into play which
negate the effect of the initial euphoria of share buyback announcement.

3.5 MEASURING OPERATIONAL EFFICIENCY

3.5.1 Objective for Analysis

The announcement of Buyback is generally done to show rosier financials. In this regards
it becomes imperative to analyze various financial parameters of the companies in order
to prove that buyback actually leads to an improvement in these parameters

The operational efficiency analysis is done with variables like Operating ratios,
Profitability ratios. In our analysis we have taken the changes in the ratio for a
period of 1 year since that gives us a clear idea as to how the Companies try to use
buyback method to show better financial ratios.

For e.g. when a company uses its cash to buy stock, it reduces outstanding shares and
also the assets on the balance sheet (because cash is an asset). Thus, return on assets

30
(ROA) actually increases with reduction in assets, and return on equity (ROE) increases
as there is less outstanding equity. If the company earnings were identical before and
after the buyback earnings per share (EPS) and the P/E ratio would look better even
though earnings did not improve. Since investors carefully scrutinize only EPS and P/E
figures, an improvement could jump-start the stock. For this strategy to work in the long
term, the stock should truly be undervalued.

3.5.2 Measuring changes in Earning per Share (EPS)

Impact of Buyback: – Buyback of shares actually leads to an increase in the EPS
Almost all public announcements offering to buyback shares state that the earning per
share (EPS) is expected to rise after the buyback and, as such, there would be
enhancement of shareholder value. There is theoretical support for such expectation. A
company’s total earnings are expected to be maintained but the number of outstanding
shares will get reduced due to buyback. Hence, a rise in per share earning is expected.
Our empirical data also supports this, as is brought out later. Theoretically, in the case of
most tender offers, which involve commitment for buying back a definite number of
shares within 30 days, the post-buyback share price may be expected to rise in proportion
to rise in EPS, assuming that other things remain the same. However, in case of open
market buyback offers, there is no commitment to buy and the actual quantity which
would be bought is absolutely uncertain. Hence, the effects on post-buyback on EPS are
not predictable to a full extent

31
3.5.2.1Impact on EPS for Tender Offer

Findings: We find that out of the 7 companies selected for this method 6 companies
showed an increase in their EPS hence confirming our initial view tat in tender offer
leads to an increase in EPS.

3.5.2.2 Impact on EPS for Open Market

32
Findings: We notice that out of the 28 companies selected by us 22 that is again close to
80% of the companies have actually shown an increase in the EPS thereby strengthening
our hypothesis that share buyback actually leads to an increase in EPS both for Tender as
well as Open Offer

3.5.2.3 Explaining the EPS decline

We have earlier said that there is a theoretical justification to believe that share buybacks
cause the EPS to rise after the completion of buyback. Yet, the EPS does not rise in every
case in actual practice.

We found that the EPS had declined over one year after buyback in about 20% of the
buyback companies including both tender as well as Open Market through Stock
Exchanges Offer.

From the theoretical angle, this is an aberration which requires explanation. The profits
or fortunes of companies may improve or deteriorate from time to time due to a great
variety of factors, such as company specific factors (workers’ strike, some break-down or
calamity like flood) and external factors, like cyclical factors, competition, government
policies, etc

3.5.3 Measuring changes in Price Earning Ratio

The buyback also helps to improve the company’s price-earnings ratio (P/E). The P/E
ratio is one of the most well-known and often-used measures of value. At the risk of
oversimplification, when it comes to the P/E ratio, the market often thinks lower is better.

We have taken the P/E multiple for both the tender as well as the open market method
and analyzed changes .Since there is actually an increase in EPS theoretically as the no of
outstanding share decreases

Therefore according to the formula:

33
There should actually be a decrease in the P/E multiple but since it also depends upon the
current market value of the share. Hence if the market value increases by more than the
increase in EPS then it would actually lead to an increase in P/E multiple

3.5.3.1Changes in PE Multiple

Findings: We find that in the Open Offer there is 50 % of the companies showing an
increase in the P/E multiple and 50 % companies showing a decrease in PE multiple and
for Tender Offer respectively it is 71 % & 29% respectively.

3.5.4 Measuring changes in ROE- Return on Equity

Definition: Also known as "Return on Net Worth" (RONW). The amount of net
income returned as a percentage of shareholders equity. Return on equity measures a
corporation's profitability by revealing how much profit a company generates with the
money shareholders have invested.

ROE is expressed as a percentage and calculated as:

ROE

34
Impact of Buyback: As a result of the buyback; return on equity (ROE) increases
because there is less outstanding equity. In general, the market views higher ROE as
positive

3.5.4.1 Impact on ROE for Both Methods

Findings: Our pie diagram shows that for 24 companies we actually see an increase in
the ROE as has been stated earlier but for 11 companies we see a decrease in ROE. This
contradictory result is seen because of the fact that the Net Income in the formula for
ROE is affected by other factors which overcome the decline in shareholders equity due
to the buyback.

35
 CHAPTER 4
MARKET CAPITALIZATION IMPACT

4.1 IMPACT OF BUYBACK

Since a buyback can only be made out of free reserves, securities premium account or
proceeds of shares, devaluation in market capitalization are natural consequences of a
share buyback.

Findings: To answer the perennially question as to whether shareholders are better off
in tendering their shares in a Buyback Offer , perhaps it will be better to know that the 35
companies actually ended up with the erosion of a whopping 3516.21 Cr. in the market
capitalization after the buyback . This erosion of market capitalization has been
calculated as a % change of market capitalization over the Announcement Date to 1 year
after the Buyback. This indicates that shareholders who did not participate in the buyback
programme have suffered double loss.

Firstly, the remaining shareholders in the company were shoddier because the company
extended their funds in buyback leading to decline in companies’ book value and
secondly the market prices of shares plunge after the buyback. The result suggests that
the buybacks in India seem to be driven by motives that are not necessarily good for
shareholders staying on.

4.2 IS BUYBACK DESIRABLE?

Share buybacks have become increasingly popular in recent years as the expanding
economy has strengthened corporate cash flow and boards have bowed to perceived
investor pressure to hand back cash. The relatively low level of debt carried by listed
companies has also provided scope to take on more leverage and return cash through
share buybacks

Share buybacks can be a good thing when a company is sitting on a pile of cash which is
surplus to trading requirements and expansion plans. However many companies are

36
ignoring the essential valuation criteria that determine whether or not a buyback creates
value for a company’s investors.

For this ignorance on the part of the companies’ management the buyback of shares
might not turn out to be that good an option. Let us have a look at the reasons for this.

EPS May Be Up, But Intrinsic Value Remains Flat : Many market participants and
executives believe that since a repurchase reduces the number of outstanding shares, thus
increasing EPS, it also raises a company's share price but an in EPS is offset by a
reduction in the P/E ratio

Since the company's operations don't change, its return on operating capital is the same
after the buyback The Company’s earnings fall as a result of losing the interest income,
but its EPS rises because the number of shares has fallen more than earnings have. The
share price remains the same; however, as the total company value has fallen in line with
the number of shares. Therefore, the P/E ratio, whose inputs are intrinsic value and EPS,
drops .The impact is similar if the company increases debt to buy back more shares.

Value-Depleting Buybacks: Buybacks seem to be driven by motives that are not

necessarily good for shareholders staying on. The exiting shareholder may get a good
price. The success of a buyback programme in creating value lies in the critical issue of
whether it adds to the company's value. Most buybacks have been value-depleting. This
is because the unstated, yet real, motive seems to be to use them to hike promoter stake.
Quite comfortably too because this route ensures that the company foots the bill

No Surplus Cash: The buyback route is being pursued by companies that have no
surplus cash. What is important in any buyback is for the company to have extra cash not
required to fund the future growth and which can be returned to shareholders. The cash
used for the buyback is after setting apart funds for at least maintaining, if not improving,
the current growth rate but it is being seen that companies are using funds that were
allocated for their growth plans to buyback the shares at a high price which is not
justified and will hamper their future growth.

37
 CHAPTER 5
SHARE BUYBACK REGULATION IN INDIA
A regulatory framework1 for share buybacks was put into place in India simultaneously
with the introduction of the buyback system in 1998.We have under taken detailed
examination of the share buyback regulation system in India, giving special attention to
the following aspects:

(a) How much of the shares are allowed to be bought back.

(b) Conditions imposed regarding the source of financing the Share buyback.

(c) Requirement of extinguishing the shares bought back.

(d) Precautionary conditions for safeguarding creditors and the Company’s Solvency.
(e) Conditions relating to the methods of share buyback.
(f) Precautions against unhealthy practices.
(g) Procedural requirements.

(f) Disclosure and reporting requirements.

5.1 REGULATORY OVERVIEW
Share buyback by companies in India are regulated by Sections 77A, 77AA and 77B of
the Companies Act

Rules Applicable
For Listed Public Companies: By the SEBI (Buyback of Securities) Regulations,
originally framed in 1998 and amended from time to time thereafter.

For Unlisted Public Companies And Private Companies: The Rules of the Central
Government, called the Private Limited Company and Unlisted Public Limited Company
(buyback of Securities) Rules 1999, notified on 6th July 1999, are applicable.

38
 5.2 MAXIMUM PERMISSIBLE BUY BACK
The maximum extent of share buyback allowed in India is limited to 25% of its total paid
up capital and reserves. It has also been prescribed that buyback of equity shares in any
financial year shall not exceed 25% of its total paid-up equity capital in that financial
year.

5.3 SOURCE OF FINANCING SHARE BUYBACKS

I. Free Reserves- Share buyback should be out of free reserves or undistributed profits.
This means that unless a company has the requisite reserves, it is not allowed to buyback
shares. Most other countries, with the notable exception of the U.S, have a similar
requirement. In other words, the share buyback has come to be regarded as a way of
returning the undistributed or accumulated profits to the shareholders. In a sense, it is an
alternative to the payment of a special dividend.

Accounting Procedure: In India, the amount paid out for share buyback is required to be
transferred from the reserves to capital redemption reserve account in order to preserve
the company’s equity base.

The Us Exception - It may be noted here that the U.S. represents perhaps the most
liberal regime for share buybacks as it allows share buyback by borrowing the required
funds and thereby shrinking the equity base and replacing it by debt. It does not require
the company to possess undistributed profits before undertaking share buyback.

II. Securities premium account - A company in India can purchase its own shares
out of securities premium account also.
• Extinguishment requirement: INDIAN regulations require that the shares bought
back must be extinguished, i.e. they cannot be reissued. The U.S. regulations do not
require extinguishment but the U.K. regulations do. Some other countries also do not
require extinguishment.

39
• Creditors’ protection: The Indian regulations relating to share buybacks are aimed
specially at protecting the company’s creditors. The company must file with Registrar
of Companies and SEBI a “declaration of solvency”, affirmed by an affidavit to the
effect that the Board of Directors has made a full enquiry into the affairs of the
company and that the company is capable of meeting its liabilities and will not be
rendered insolvent within a period of one year of the declaration. The company is also
required to ensure that its post-buyback debt/equity ratio is not more than 2:1

5.4 CHECKING UNHEALTHY PRACTICES

Some regulations seem to be designed to discourage unhealthy practices in share
buyback. These regulations are as follows
 Reissue of repurchased shares: A company which has bought back shares is not
allowed issuing the same kind of shares (including rights) for a certain period. This
period was originally 24 months but was reduced to just 6 months in 2001.
 Procedural requirement (shareholders approval): Originally, any share buyback,
however small, requires approval by a special resolution at `shareholders general
meeting. An amendment made in 2001 provides that if the buyback proposed is not
more than 10% of paid up capital and reserves, a board resolution is sufficient to
authorize it, without the need for a special resolution by shareholders. This amendment
made share buybacks easier but it infringes an important general principle of corporate
law that a change in share capital should require the approval of the general body of
shareholders. Most countries insist on shareholders’ approval for share buyback
irrespective of the size of share buyback.

5.5 DISCLOSURE AND REPORTING REQUIREMENTS

The disclosures required before the share buyback, during the buyback, and post buyback
are as follows:
• `Notice for explanatory statement : The notice for general meeting, called for passing
the necessary special resolution to authorise share buyback must give an explanatory
statement disclosing, inter alia, the necessity for the buyback; the basis of arriving at
the buyback price, maximum amount of buyback, sources of funds for buyback, the

40
 aggregate shareholding of the promoters and the directors, and the aggregate number of
shares purchased or sold by these persons during the preceding 6 months
.
• Disclosures regarding public announcements: Similar disclosures are required to be
made by way of a public notice in newspaper in case buyback is through the resolution
of the Board of Directors. The company is required to make a public announcement,
giving details about the process and methodology to be adopted for the buyback, the
necessity of buyback, listing details and stock market price data, number of equity
shares purchased / sold during the preceding 12 months by promoters, and also persons
acting in consort with promoters.

• Disclosure after completion of buy-back: Immediately after the completion of

buyback programme, the company is required to issue an advertisement in a national
daily giving information about the number of shares bought, the prices at which the
share have been bought and how the capital structure and the shareholding pattern have
changed after the buyback vis-à-vis before buyback.

5.6 ANALYSIS OF REGULATORY ENVIRONMENT

The regulatory requirements in regard to open market offers through stock exchanges in
India are rather lax. As we have seen in the above enumeration of the regulations.
Therefore after going through all the regulations I have found that some changes in
Buyback regulation could actually make the Buyback programme more transparent &
efficient. Hence here are some Suggestions /Improvements

Announcement of a minimum price: The Company is required to announce a

‘maximum price’, which has no meaning from the shareholders’ viewpoints. The
international best practice is that both the maximum price and the minimum share
buyback price should be announced

Suggestion: A minimum price announcement should also be there

41
Statutory disclosures: It was found that the companies going in for STOCK
RERPURCHASE just briefly mention about the buyback in their reports. Inclusion of a
report on actual buybacks in the quarterly reports of companies can bring the much
needed transparency in the case of open market buyback offers in India It may be
suggested that the disclosure of actual buybacks under any buyback programme be made
a part of the company’s quarterly reports, as in the U.S. If no buyback under an
announced programme have been made, the quarterly report should say so. A new rule
implemented by the SEC in the U.S. in March 2004 requires companies to make
quarterly disclosures of:

(i) The total number of shares purchased during the past quarter;
(ii) The average price paid per share;
(iii) The total number of shares purchased as part of a publicly announced plan or
programme
(iv) The maximum number (or approximate value) of shares that may yet be
purchased under the plan or programme.

Suggestion: I feel that all the disclosures mentioned above should be followed for Indian
companies also
Providing details of transactions of share buybacks: In many other countries details of
actual buyback transactions have to be reported to either the stock exchanges or other
supervisory/regulatory authorities. For instance, in the UK, Australia, Netherlands, Japan
and Hong Kong, actual buyback reports have to be filed immediately or within one day
on a continuous basis during the buyback period. In Canada, France and Italy, reports on
actual buybacks have to be submitted on a monthly basis.

Suggestion: I feel that companies should provide details of all the transactions in the
share buybacks

Reissue of shares: Allowing a company to make a fresh issue of shares just 6 months
after a share buyback may encourage undesirable practices by promoters. They may
buyback at low prices, reduce the floating stock, push up the stock price and soon come

42
out with a share issue at a higher price. It also raises the question whether companies
which are unable to have a credible financial plan and capital budget for even one year
ahead, should at all be allowed to go for share buyback. It would be very confusing if a
company buys back its shares on the ground that it has surplus cash and then, within the
same year, it decides to issue fresh equity for raising capital.

Suggestion: I feel that no fresh issue of shares should be allowed for at least one year
after share buyback.

Removing the regulation of shareholders approval requirement: Dispensing with the

shareholders approval when the share buyback amounts to less than 10% of the paid up
equity capital deprives the shareholders of their basic rights of voting about the changes
in the equity share capital.

Suggestion: This change should be done away with.

RECESSION & BUYBACK

Buy-backs are a common feature in bear phases, when investors lose confidence and
hammer stocks down through buy-backs, promoters send out a signal that they are
confident of the company's potential. Thus companies are now utilizing surplus funds to
buy their shares to shore up prices, rather than expand their businesses. Corporate India
seems to be heavily into reverse gear with promoters locking up value for themselves by
merging group firms and buying back shares from the public at attractive low prices amid
the meltdown at the bourses.

Analysts believe companies hit by the slowdown are trying to shore up their resources by
merging group firms and promoters are increasing their holdings in the companies by
buying shares at the lower valuation in current times.

43
 CHAPTER 6

FINDINGS
The findings based on the analysis of the data on buyback are summarized below:

• No particular characteristics emerged with respect to the type of industry and the offers
made during the period of study. The purpose was to isolate industry based triggers that
prompt firms to offer back of their stocks
• The analysis indicated that most of the buy back offers were made during the period
when the stock markets were buoyant and the number of buyback receded when the
markets where in a bullish phase
• The Percentage of buyback offered within the maximum permissible limits (25%of the
paid up capital) varied from industries. Majority of the firms exhibited low leverage an
essential requirement considering the stipulations in the regulations as to the post back
leverage of a maximum of two. Consequently most of the firms had no major changes
in the capital structure post buy back
• The analysis show that many of the companies that have gone in for the buybacks seem
to be the likely candidates for it as has been shown in the candidature for buyback
section. It is most likely that they did not have enough projects on hand
• The announcement of buyback did bring about an increase in the share prices but it was
a short term phenomenon as is seen in the case of both tender offer as well as open
market through stock exchanges. The prices of shares did not appreciate reasonably
on a long term sustainable basis and as a result there was a transfer or wealth from non
tendering shareholders. In many cases the prices after Buyback fell below the buyback
price. Hence it can be concluded that share buyback could not ensure a sustained rise in
the prices of the scrip
• The Findings confirmed that the tendering stockholders gained from the buy back
relative to the non –tendering stockholders suggesting that a holding strategy in the buy
back was a sub optimal strategy.

44
 CHAPTER 7

CONCLUSIONS AND RECOMMENDATIONS

• From all the discussion that was outlined in the study, buyback was adopted in
India late 1998 had not made a major impact in the Indian capital markets as it had in
other countries but now share buybacks slowly appear to be gaining fancy in Indian
Corporate sector. Companies as well as capital markets can thus be rejuvenated by
resorting to this excellent tool of Financial Engineering

• However, Anomalies and inconsistencies observed need to be set right to enable

companies to buyback their shares and to provide shareholders a transparent and
manipulative free environment

• Buybacks have been used as a tool for the management to improve the
shareholding of the PROMOTERS and impart them short term gains. Raising the
promoter’s stake is well accepted but undeclared agenda. At times the buyback is
motivated by the promoter’s vested interest to raise his own stake, using company’s
funds. An increase in the promoters stake is only incidental. However in India
distributing cash to the shareholders seems to be the incidental objective -the prime
one being increasing promoters’ stake.

• One important implication of such a behavior is that regulatory norms of SEBI

are still not perfect, and more needs to be done in the Indian context to bring the
market at par with developed economies. The placing of red carpet for the new
market mantra “Share Buyback shall ensure that the companies resorting to Buyback
adopt good corporate practices so that the introduction of new provision does not
result in any scam. In this regard SEBI has to play a crucial role in the regulation and
guiding the buyback of shares in INDIA

• Signaling effect is the most important outcome from the Buyback but it has to be
used wisely as its misuse can lead to huge penalty in form of highly deteriorated

45
performance. Low tendering of shares in a Buyback does not necessarily translate
into improved market performance. ROE & EPS may increase or decrease but when
the buyback results in fall in these parameters, the penalty for failure is huge as the
dip is very large

• The decision of whether share buybacks are all that attractive to a company and
its shareholders depend on many factors, which may be unique to each case. Due
consideration has to be given to the significance of each factor before a final decision
is made. While share buybacks brings a lot of cheers to the capital Markets, it has
been observed that buybacks are made at the cost of hard assets and often companies
are forced to sell of their hard assets to mobilize funds for share buyback exercises.

• A company’s management must determine whether buying back shares is better

use of shareholders money than reinvesting in business, and determine whether either
of these options is better than simply returning the money to shareholders through
dividends

• Some of the other factor which demands attention is normally the pricing timing
and the market conditions at the time of buyback announcement .In many cases it was
observed that the company that offered buyback; prices far above premium had over
subscription and the prices fell after buyback.

• From qualitative as well as quantitative analysis we can conclude that in India

that the buybacks have not been very successful in terms of yielding excess returns to
shareholders both from market and by way of balance sheet figures this is due to the
fact that we should remember that fortunes of companies are undergoing constant
change due to a great variety of factors, specially over long periods.

• Therefore share buyback cannot provide immunity against the fundamental

economic forces.

46
 BIBLIOGRAPHY

Books Referred

• PAT DORSEY (2004), the five rules for successful stock investing, John Wiley &
Sons, New Jersey.

• DAMODARAN, (2006), Investment Valuation: Second edition, Tata McGraw

Hill Publishing Co. Ltd.

Websites
• http://news.moneycontrol.com/mf/glossary.php

• http://www.investopedia.com/university/mutualfunds/default.asp

• http://www.valueresearchonline.com

• http://www.amfiindia.com/

• http://www.sbimf.com/portal/static/calculator/RiskAssess/RiskAssessCal1.asp

• http://www.mutualfundsindia.com/resourcecentre.asp

• http://rbidocss.rbi.org.in/rdocs/Publications/PDFs/87122.pdf

47
 ANNEXURE

Table 1 Industrial & Market Capitalization Classification

Name of the Company Market Cap Industrial Classification

Adf Foods Limited Small Cap Fmcg

Avery India Ltd Small Cap Capital Goods

Apollo Finvest (India )
Ltd - Small Cap Banking & Financial Services
Glaxosmithkline
Consumer Healthcare
Ltd Large Cap Fmcg
Apollo Finvest (India)
Ltd Small Cap Banking & Financial Services

Gtl India Ltd Mid Cap Telecommunication Services

Abbott India Limited Small Cap Health& Pharmaceuticals

Mastek Limited Small Cap It ( Tech)

Britannia Industries Ltd Mid Cap Fmcg

Reliance Energy Limited Large Cap Power

Reliance Industries
Limited Large Cap Oil& Gas

:Etc Networks Ltd Small Cap Media & Entertainment

Aegis Logistics Ltd - Small Cap Logistics

Dil Ltd Small Cap Health& Pharmaceuticals

Polaris Software Lab Ltd Large Cap It ( Tech)

Berger Paints India
Limited Mid Cap Capital Goods
Godrej Consumer
Products Mid Cap Fmcg
Indiabulls Financial Ser
Ltd Mid Cap Banking & Financial Services

Srf Polymers Ltd Small Cap Miscellaneous & Diversified

Srf Limited Small Cap Miscellaneous & Diversified

48
Carol Info Services
Limited Small Cap Health& Pharmaceuticals

Etc Networks Limited Small Cap Media & Entertainment

Natco Pharma Limited Small Cap Health& Pharmaceuticals

Carol Info Services
Limited Small Cap Banking & Financial Services
Ici India Limited -
Buyback Mid Cap Consumer Durables
Hindustan Unilever
Limited Large Cap Banking & Financial Services

MRO-TEK Limited Small Cap Telecommunication Services

Ace Software Limited Small Cap It ( Tech)

Gujarat Ambuja Exports
Limited Small Cap Fmcg
SRF Limited - Public
Notice Small Cap Miscellaneous & Diversified
Sasken technologies
limited Small Cap It ( Tech)

Mastek Limited Small Cap It ( Tech)

Patni Computer Systems
Limited Large Cap It ( Tech)
Madras Cements
Limited Large Cap Capital Goods

Reliance Energy Limited Large Cap Power

49
Table 2 Contention for Share Buyback data

50
 P/B Promoter De Current
NAME OF THE COMPANY Ratio Roce Stake(%) Ratio Ratio
1 ADF Foods Limited 0.36 5.83 44.52 0.25 1.75
2 Avery India Ltd 1.13 11.32 51 0 2.09
3 Apollo Finvest (I) Ltd - 0.31 -3.98 57.47 0 5.45
4 GlaxoSmithKline Consumer 2.83 12.44 39.99 0 2.41
5 Apollo Finvest (India) Limited 0.47 8.03 58.94 0 11.88
6 Gtl india ltd 2.12 2.85 32.00 0.79 2.72
7 Abbott India Limited 3.36 25.2 61.70 0.01 1.16
8 Mastek Limited 2.62 34.28 42.25 0.01 1.69
9 Britannia Industries Ltd 3.19 22.55 48.48 0.1 0.82
1
0 Reliance Engergy Limited 2.07 3.6 43.74 0.47 2.15
1
1 Reliance Industries Limited 2.01 10.93 46.7 0.66 0.88
1
2 :ETC Networks Ltd 0.89 11.7 54.42 0.03 3.76
1
3 Aegis Logistics Ltd - 1.31 18.2 63.9 0.41 1.65
1
4 DIL Ltd 0.73 1.72 59.02 0 3.3
1
5 Polaris Software Lab Ltd 1.88 8.96 24.42 0 3.14
1
6 Berger Paints India Limited 4.72 24.19 73.53 0.31 1.59
1 39.3 153.6
7 Godrej Consumer Products 8 5 68.03 0.12 0.71
1
8 Indiabulls Financial Ser Ltd 2.58 8.2 30% 1.34 0.07
1
9 SRF Polymers Ltd 1.96 3.74 63.12 0.68 1.03
2
0 SRF Limited 2.12 11.36 39.4 1.13 1.09
2
1 Carol Info Services Limited 2.03 3.6 63.73 0.06 2.24
2
2 ETC Networks Limited 0.97 11.1 54.42 0.01 3.12
2
3 Natco Pharma Limited 1.9 11.19 38.08 0.55 1.4
2
4 Carol Info Services Limited 0.36 3.6 63.73 0.06 2.24
2
5 ICI India Limited - Buyback 2.51 9.28 50.83 0 0.91
2 13.4
6 Hindustan Unilever Limited 2 61.08 51.42% 0.03 0.66
2
7 MRO-TEK Limited 1.02 12.99 35.24 0 2.74
2
8 Ace Software Limited 0.72 3.7 52.38 0.03 4.87
2
9 Gujarat Ambuja Exports Limited 1.31 15.16 63.11 0.61 1.52
3
0 SRF Limited - Public Notice 0.94 10.32 42.17% 0.55 1.39
3 5.73
1 Sasken technologies limited 1.19 51 28.91 0 2.93
3
2 Mastek Limited 2.66 41.62 34.57 0 1.22
Table 3 Market Capitalization Erosion

S.NO NAME OF THE COMPANY 30 days. 365 days MARKET CAP

Market Cap. Market EROSION
(Rs Cr) Cap. Rs Cr)

1 ADF Foods Limited 10.58 8.15 -2.43

2 Avery India Ltd 35.9 34.62 -1.28
3 Apollo Finvest (I) Ltd - 2.79 2.08 -0.71
Glaxosmithkline Consumer
4 Healthcare Ltd 1550.22 1249.02 -301.2
5 Apollo Finvest (India) Limited 5.18 4.13 -1.05
6 Gtl india ltd 2283.06 1630.43 -652.63
7 Abbott India Limited 772.67 789.61 16.94
8 Mastek Limited 356.82 352.84 -3.98
9 Britannia Industries Ltd 1507.36 1512.11 4.75
10 Reliance Engergy Limited 10057.69 8205.89 -1851.8
11 Reliance Industries Limited 71400.59 71616.98 216.39
12 :ETC Networks Ltd 56.36 54.77 -1.59
13 Aegis Logistics Ltd - 108.46 59.07 -49.39
14 DIL Ltd 52.49 47.16 -5.33
15 Polaris Software Lab Ltd 953.91 1341.31 387.4
16 Berger Paints India Limited 952.67 703.36 -249.31
17 Godrej Consumer Products 1777.03 1406.21 -370.82
18 Indiabulls Financial Ser Ltd 2702.12 2057 -645.12
19 SRF Polymers Ltd 141.27 115.66 -25.61
20 SRF Limited 1194.03 1787.86 593.83
21 Carol Info Services Limited 198.36 261.8 63.44
22 ETC Networks Limited 62.56 61.09 -1.47
23 Natco Pharma Limited 302.76 329.18 26.42
24 Carol Info Services Limited 128.32 147.44 19.12
25 ICI India Limited – Buyback 1359.53 1373.15 13.62
26 Hindustan Unilever Limited 47555.01 46285.35 -1269.66
27 MRO-TEK Limited 98.53 116.24 17.71
28 Ace Software Limited 8.06 8.39 0.33
29 Gujarat Ambuja Exports Limited 403.22 342.56 -60.66
30 SRF Limited - Public Notice 799.28 977.26 177.98
31 Sasken tecnoloies limited 419.31 884.72 465.41
32 Mastek Limited 937.13 848.02 -89.11
33 Patni Computer Systems Limited 3485.66 5299.67 1814.01

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34 Madras Cements Limited 3878.98 4386.24 507.26
35 Reliance Energy Limited 30639.75 28382.08 -2257.67

53