Buyback of Stocks

Submitted By Ishani Chakraborty 141224

Parag Chaubey 141233Sushil Agarwalla 141260

(Group No. 17)

IntroductionThe process of repurchasing outstanding

shares by a company in order to reduce the number of shares on the market is known as buyback.

Ways of RepurchasingOpen Market Purchase Tender Offer Targeted Purchase.

Open MarketCompany buys their shares as in the regular

share markets.

Tender OffersHere the firm announces to all of its

stakeholders that it is willing to buy a fixed number of shares.

Targeted PurchaseWhen firm purchases from specific individual

stockholder.

Reasons to choose RepurchaseFlexibility Executive CompensationOffset to DilutionUndervaluationTaxes

Pros & ConsProsIncreased Shareholder Value Higher Stock Prices Increased Float Excess Cash Income Taxes Price Support

ConsManipulation of Earnings Execution of BuybackHigh Stock Prices

Present Scenario in India

Present Scenario in IndiaDuring the 1990s, buyback increased

dramatically and in 1999, cash returned in buybacks overtook cash paid out in dividends, in the aggregate.

The Finance Act, 2013 introduced a withholding tax on buyback of shares (not being shares listed on a recognised stock exchange) much like dividend distribution tax