Buyback of Shares

Dec 11th, 2004 Buyback of shares… … What it means for investors Introduction Buyback of shares, i.e., clouding of own shares by a association having substantial cash reserves, has been permitted in India with effect from 31st October, 1998. Till then, an Indian company could buy its own shares only in consequence of reduction of detonating device or ordered by the Company Law bill of fare under Section 402, to give relief in a petition of oppression / mismanagement. The Government of India in consensus with the captains of industry and cable market fraternity decided to introduce buyback in company legislation. Since then about 148 companies have come up with Buyback offers. In the past 12-18 months, Indian Inc. has been reporting great performance. This performance is generating huge cash flows which poses a unique trouble of Plenty to the companies who do not have any present(prenominal) capex plans. We in this weekender, try to examine Buyback as a tool of rewarding shareholders. Benefits of a share buyback The most(prenominal) fundamental reason a company has to return cash to shareholders is where there are no investment opportunities available that best the required investment hurdle rate - Average embody of Capital (WACC).

Far better than going on a spending spree simply for lack of investment alternatives, companies directly have the option of returning cash to shareholders. Share buybacks change investors to re-deploy big(p) from mature to growth sectors of the economy, thus enhancing the efficiency of capital markets. The recent announcement of GlaxoSmithKline consumer Healthcare (GSK Con) of considering the buyback fits the above case. The company is generating cash from operations to the tune of Rs 190 crore per year (average of cultivation 5 years). In the year 2000, the company has gone for acquisition of brands like Moltova and Viva from Jagjit Industries, which turned out to be unimportant exercise. This time around, the company is considering rewarding the shareholders from buying back the... If you want to get a full essay, order it on our website: Orderessay

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