PPT: Buy Back of Securities | Advanced Accounting for CA Intermediate PDF Download

 Page 1


Buyback of 
Securities
Page 2


Buyback of 
Securities
1. What is Buyback of Securities
2. Methods of Buyback of Securities
3. Common reasons for Buy-back 
4. How to apply in a Buyback
5. Points to ponder before participating in Buyback
Flow of Presentation
Page 3


Buyback of 
Securities
1. What is Buyback of Securities
2. Methods of Buyback of Securities
3. Common reasons for Buy-back 
4. How to apply in a Buyback
5. Points to ponder before participating in Buyback
Flow of Presentation
? Buyback : Opposite of public issue of shares
? In a public issue, company sells its shares in the stock market
? In a Buyback, company offers to buy shares from the investors. After 
buyback, those shares are extinguished.
What is Buyback of Securities
The Corporate action where a 
company  repurchases its own 
shares from its existing 
shareholders
Page 4


Buyback of 
Securities
1. What is Buyback of Securities
2. Methods of Buyback of Securities
3. Common reasons for Buy-back 
4. How to apply in a Buyback
5. Points to ponder before participating in Buyback
Flow of Presentation
? Buyback : Opposite of public issue of shares
? In a public issue, company sells its shares in the stock market
? In a Buyback, company offers to buy shares from the investors. After 
buyback, those shares are extinguished.
What is Buyback of Securities
The Corporate action where a 
company  repurchases its own 
shares from its existing 
shareholders
Common reasons for Buy-back 
? To return surplus cash to shareholders
? Improve return on equity shares through
distribution of cash
? Improve earnings per share (EPS) by reduction of
shares (buy-back reduce the total number of
shares of the company)
? Shareholders get option either to sell shares and
receive cash or not to sell shares and get an
increase in percentage shareholding post
buyback without additional investment
Company Shareholders
Issue of shares
Buyback of shares
Page 5


Buyback of 
Securities
1. What is Buyback of Securities
2. Methods of Buyback of Securities
3. Common reasons for Buy-back 
4. How to apply in a Buyback
5. Points to ponder before participating in Buyback
Flow of Presentation
? Buyback : Opposite of public issue of shares
? In a public issue, company sells its shares in the stock market
? In a Buyback, company offers to buy shares from the investors. After 
buyback, those shares are extinguished.
What is Buyback of Securities
The Corporate action where a 
company  repurchases its own 
shares from its existing 
shareholders
Common reasons for Buy-back 
? To return surplus cash to shareholders
? Improve return on equity shares through
distribution of cash
? Improve earnings per share (EPS) by reduction of
shares (buy-back reduce the total number of
shares of the company)
? Shareholders get option either to sell shares and
receive cash or not to sell shares and get an
increase in percentage shareholding post
buyback without additional investment
Company Shareholders
Issue of shares
Buyback of shares
Conditions for Buy-back 
Maximum Buy-
back Limit
• <= 25% of (Paid-up capital + Free Reserves)
Debt to Equity
Ratio *
• < 2:1 
Approved by
Special/ Board
Resolution
• Board Resolution would suffice if Buy-back <=
10% of (Paid up capital + Free Reserves)
• Special Resolution required, if more than 10%
Cooling
period #
• 1 year from the date of expiry of buyback
period
* Paid up capital & free reserve
# No offer of buy-back should be made by a company within a period of one year from the date of 
the closure of the preceding offer of buy-back