Final thesis 25-08-2011 - INFLIBNETshodhganga.inflibnet.ac.in/bitstream/10603/3493/12/12_chapter...
Transcript of Final thesis 25-08-2011 - INFLIBNETshodhganga.inflibnet.ac.in/bitstream/10603/3493/12/12_chapter...
93
CHAPTER -5
ANALYSIS AND FINDINGS
5.1 Impact of share buy-backs on companies’ share price
movements
Share price movements are a result of a bundle of factors such as company
fundamentals, demand and supply of particular scrip and various corporate
announcements and unpredictable global factors. The sensitive Bombay Stock
Exchange and National Stock Exchanges in India etc. react to these factors.
Buy-back of shares an important event also affects the share price movements.
The impact of share buy-back on company’s share price movements are
analysed for three different stages i.e. pre buy-back phase, during buy-back and
post buy- back phase.
5.1.1 Comparison of mean share prices before buy-back and mean
share prices during buyback.
The mean share price before buy-back is the mean of share prices 10 days
before opening of the offer date of each selected sample company. The mean
share price during buy-back is the mean of share prices from the opening of the
offer date of buy-back to the closing of the offer. The period from offer date to
closing date ranges from one month to one year. The mean share prices before
and during are presented in the following Table 3.
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Table 3
Mean Share Prices before and during buy-back
Sr.
No. Name of Company
A
`̀̀̀
B
`̀̀̀
%
Diff.
1 Selan Exploration Technologies Ltd. 13.26 11.08 -16.44
2 Great Eastern Shipping Ltd 34.84 31.87 -8.52
3 Raymonds Ltd 139.14 116.2 -16.49
4 Selan Exploration Technologies Ltd. 11.13 11.05 -0.72
5 Finolex Industries Ltd 19.11 27.04 41.50
6 Jayshree Tea and Industries Ltd 60.08 48.6 -19.11
7 Siemens Ltd 197.03 227.42 15.42
8 Winsome Yarns Ltd 6.29 6.8 8.11
9 Great Eastern Shipping Ltd 29.2 28.77 -1.47
10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 43.65 8.47
11 Britannia Industries Ltd 555.74 531.58 -4.35
12 OCL India Ltd 49.01 53.87 9.92
13 Kesoram Industries Ltd 22.17 26.81 20.93
14 Exide Industries Ltd 57.5 73.49 27.81
15 Godrej Consumer Products Ltd 55.53 64.85 16.78
16 Heritage Food (India) Ltd (16) 23.22 25.71 10.72
17 G G Dandekar Machine Works 161.23 236.81 46.88
18 Hindalco Industries Ltd 715.9 722.16 0.87
19 Blue Star Ltd 55.02 67.55 22.77
20 Selan Exploration Technologies Ltd. 10.47 9.51 -9.17
21 Winsome Yarns Ltd 6.39 7.27 13.77
22 Finolex Industries Ltd 31.53 33.31 5.65
23 Godrej Consumer Products Ltd 93.36 109.17 16.93
24 Britannia Industries Ltd 523.16 517.62 -1.06
25 Venky’s (India) Ltd 46.38 47.27 1.92
26 Solitaire Machines Tools Ltd 2.98 4.55 52.68
27 Bombay Dyeing And Manufacturing Co. Ltd 42.18 53.28 26.32
28 Sun Pharmaceuticals Ltd 600.68 350.4 -41.67
29 Godrej Consumer Products Ltd 100.83 114.22 13.28
30 Kesoram Industries Ltd 26.89 33.34 23.99
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Sr.
No. Name of Company
A
`̀̀̀
B
`̀̀̀
%
Diff.
31 ECE Industries Ltd 28.13 37.1 31.89
32 Ace Software Exports Ltd 8.09 9.55 18.05
33 Fine- Line Circuits Ltd 3.83 5.26 37.34
34 Selan Exploration Technologies Ltd. 8.95 14.42 61.12
35 Mazda Ltd 8.92 9.05 1.46
36 Godrej Consumer Products Ltd 142.68 167.9 17.68
37 Godrej Consumer Products Ltd 176.42 237.36 34.54
38 Mastek Ltd 245.25 330.29 34.67
39 Avery India Ltd 35.57 39.92 12.23
40 Britannia Industries Ltd 589.98 621.14 5.28
41 Reliance Industries Ltd 530.39 655.36 23.56
42 DIL Ltd 200.89 240.31 19.62
43 Godrej Consumer Products Ltd 391.88 502.84 28.31
44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 1037.2 42.94
45 Indiabulls Financial Services 162.88 192.07 17.92
46 Prime Securities Ltd 62.74 48.8 -22.22
47 SRF Ltd 199.94 216.74 8.40
48 Natco Pharma Ltd 112.33 133.93 19.23
49 Revathi Equipments Ltd 662.68 683 3.07
50 Gujarat Ambuja Exports Ltd 28.48 41.3 45.01
51 Ace Software Exports Ltd 16.08 16.94 5.35
52 MRO- Tek Ltd 46.59 46.21 -0.82
53 ICI India Ltd 502.62 536.83 6.81
54 Hindustan Unilever Ltd 220.07 223.96 1.77
55 Madras Cements Ltd 3685.86 3436.25 -6.77
56 Reliance Energy Ltd 1365.69 878.05 -35.71
57 Reliance Infra Ltd 526.55 507.22 -3.67
58 Goldiam International Ltd 57.33 41.67 -27.32
59 Great Offshore Ltd 665.78 537.75 -19.23
60 Mastek Ltd 371.48 378.44 1.87
61 SRF Ltd 122.81 93.03 -24.25
62 Patni Computers Ltd 226.22 206.81 -8.58
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Sr.
No. Name of Company
A
`̀̀̀
B
`̀̀̀
%
Diff.
63 Gateway Distriparks Ltd 90.92 81.41 -10.46
64 Gujarat Fluorochemicals Ltd 191.55 95.36 -50.22
65 Sasken Communications Technologies Ltd 139.47 108.58 -22.15
66 Rain Commodities Ltd 193.01 130.31 -32.49
67 Surana Telecom and Power Ltd 28.85 20.82 -27.83
68 Godrej Consumer Products Ltd 117.45 129.92 10.62
69 Supreme Industries Ltd 106.2 113.47 6.85
70 E.I.D. Parry India Ltd 141.27 146.47 3.68
71 ANG Auto Ltd 75.69 54.69 -27.74
72 DLF Ltd 311.37 210.17 -32.50
73 GSS America Infotech Ltd 124.51 154.44 24.04
74 Jindal Poly Films Ltd 147.58 250.91 70.02
75 L K P Finance Ltd 59.37 77.86 31.14
76 Mangalam Cement Ltd 48.66 89.48 83.89
77 Monnet Ispat Ltd 128.2 163.56 27.58
78 FDC Ltd 25.1 34.36 36.89
79 T V Today Network Ltd 56.18 85.62 52.40
80 Valiant Communications Ltd 22.31 22.34 0.13
81 Avantel Ltd 43.06 48.54 12.73
82 Godrej Industries Ltd 106.06 133.04 25.44
A=Mean Share Price 10 days before opening of buy-back
B=Mean Share Price during buy-back.
% Difference between A and B = (B-A)/A×100
It is evident from the Table 3 that the difference in the mean share prices of
shares 10 days before opening of the offer date and the mean share prices of
shares during buy-back ranged from (-25%) to 100%. In case of 56 companies
(68%) the mean share prices during buy-back increased more than mean share
prices before buy-back. In case of 20 companies (24.4%), the mean prices
increased by more than 25%. In case of Mangalam Cement Ltd it increased by
(83.89%). Thus, in majority of the cases the mean share prices increased after
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the announcement of buy-back. However, the mean share prices in 26 cases
declined after announcement. In case of 8 companies, i.e. Sun Pharmaceuticals
Ltd, Reliance Energy Ltd, Goldiam International Ltd, Gujarat Flurochemicals
Ltd, Rain Commodities Ltd, Surana Telecom and Power Ltd, ANG Auto Ltd,
and DLF Ltd the mean share prices declined by more than
(-25%) and in case of 18 companies the mean share prices declined up to
(-25%).
Thus we can conclude that on an average mean share prices have increased
during buy-back as compared to the mean share prices before buy-back as seen
in the case of 56 companies (68%). Therefore, the Ho: The mean share price
before buy-back = the mean share price during buy-back is rejected.
5.1.2 Comparison of the mean share prices during buy-back and
after buy-back
Table 4
Mean Share Prices during and after Buy-Back
Sr.
No. Name of the Company
B
`̀̀̀
C
`̀̀̀
%
Diff.
1 Selan Exploration Technologies Ltd. 11.08 13.32 20.22
2 Great Eastern Shipping Ltd 31.87 27.95 -12.30
3 Raymonds Ltd 116.2 103.84 -10.64
4 Selan Exploration Technologies Ltd. 11.05 9.07 -17.92
5 Finolex Industries Ltd 27.04 26.97 -0.26
6 Jayshree Tea and Industries Ltd 48.6 44.26 -8.93
7 Siemens Ltd 227.42 303.58 33.49
8 Winsome Yarns Ltd 6.8 6.77 -0.44
9 Great Eastern Shipping Ltd 28.77 28.59 -0.63
10 Bombay Dyeing And Manufacturing Co. Ltd 43.65 48.57 11.27
11 Britannia Industries Ltd 531.58 607.73 14.33
12 OCL India Ltd 53.87 48.75 -9.50
13 Kesoram Industries Ltd 26.81 35.3 31.67
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Sr.
No. Name of the Company
B
`̀̀̀
C
`̀̀̀
%
Diff.
14 Exide Industries Ltd 73.49 89.81 22.21
15 Godrej Consumer Products Ltd 64.85 81.69 25.97
16 Heritage Food (India) Ltd (16) 25.71 27.12 5.48
17 G G Dandekar Machine Works 236.81 235.1 -0.72
18 Hindalco Industries Ltd 722.16 629.9 -12.78
19 Blue Star Ltd 67.55 72.72 7.65
20 Selan Exploration Technologies Ltd. 9.51 8.51 -10.52
21 Winsome Yarns Ltd 7.27 7.29 0.28
22 Finolex Industries Ltd 33.31 40.11 20.41
23 Godrej Consumer Products Ltd 109.17 106.11 -2.80
24 Britannia Industries Ltd 517.62 537.85 3.91
25 Venky’s (India) Ltd 47.27 53.99 14.22
26 Solitaire Machines Tools Ltd 4.55 3.73 -18.02
27 Bombay Dyeing And Manufacturing Co. Ltd 53.28 68.2 28.00
28 Sun Pharmaceuticals Ltd 350.4 513.81 46.64
29 Godrej Consumer Products Ltd 114.22 142.94 25.14
30 Kesoram Industries Ltd 33.34 46.3 38.87
31 ECE Industries Ltd 37.1 50.18 35.26
32 Ace Software Exports Ltd 9.55 11.49 20.31
33 Fine- Line Circuits Ltd 5.26 4.22 -19.77
34 Selan Exploration Technologies Ltd. 14.42 17.25 19.63
35 Mazda Ltd 9.05 10.95 20.99
36 Godrej Consumer Products Ltd 167.9 166.84 -0.63
37 Godrej Consumer Products Ltd 237.36 277.06 16.73
38 Mastek Ltd 330.29 364.85 10.46
39 Avery India Ltd 39.92 43.56 9.12
40 Britannia Industries Ltd 621.14 629.39 1.33
41 Reliance Industries Ltd 655.36 901.94 37.63
42 DIL Ltd 240.31 333.37 38.72
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Sr.
No. Name of the Company
B
`̀̀̀
C
`̀̀̀
%
Diff.
43 Godrej Consumer Products Ltd 502.84 717.71 42.73
44 Glaxo Smithkline Pharmaceuticals Ltd 1037.2 1428.45 37.72
45 Indiabulls Financial Services 192.07 188.13 -2.05
46 Prime Securities Ltd 48.8 60.19 23.34
47 SRF Ltd 216.74 235.7 8.75
48 Natco Pharma Ltd 133.93 116.2 -13.24
49 Revathi Equipments Ltd 683 878.91 28.68
50 Gujarat Ambuja Exports Ltd 41.3 77.92 88.67
51 Ace Software Exports Ltd 16.94 16.54 -2.36
52 MRO- Tek Ltd 46.21 45.30 -1.97
53 ICI India Ltd 536.83 496.66 -7.48
54 Hindustan Unilever Ltd 223.96 245.66 9.69
55 Madras Cements Ltd 3436.25 3281.7 -4.50
56 Reliance Energy Ltd 878.05 541.45 -38.33
57 Reliance Infra Ltd 507.22 688.03 35.65
58 Goldiam International Ltd 41.67 17.76 -57.38
59 Great Offshore Ltd 537.75 510.23 -5.12
60 Mastek Ltd 378.44 345.34 -8.75
61 SRF Ltd 93.03 83.11 -10.66
62 Patni Computers Ltd 206.81 137.79 -33.37
63 Gateway Distriparks Ltd 81.41 65.45 -19.60
64 Gujarat Fluorochemicals Ltd 95.36 74.02 -22.38
65 Sasken Communications Technologies Ltd 108.58 76.79 -29.28
66 Rain Commodities Ltd 130.31 88.1 -32.39
67 Surana Telecom and Power Ltd 20.82 17.24 -17.20
68 Godrej Consumer Products Ltd 129.92 120.7 -7.10
69 Supreme Industries Ltd 113.47 113.32 -0.13
70 E.I.D.Parry (India) Ltd 146.47 133.14 -9.10
71 ANG Auto Ltd 54.69 39.8 -27.23
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Sr.
No. Name of the Company
B
`̀̀̀
C
`̀̀̀
%
Diff.
72 DLF Ltd 210.17 251.81 19.81
73 GSS America Infotech Ltd 154.44 175.11 13.38
74 Jindal Poly Films Ltd 250.91 259.36 3.37
75 L K P Finance Ltd 77.86 86.53 11.14
76 Mangalam Cement Ltd 89.48 134.86 50.72
77 Monnet Ispat Ltd 163.56 287.58 75.83
78 FDC Ltd 34.36 42.15 22.67
79 T V Today Network Ltd 85.62 94.26 10.09
80 Valiant Communications Ltd 22.34 28.37 26.99
81 Avantel Ltd 48.54 49.21 1.38
82 Godrej Industries Ltd 133.04 153.73 15.55
B= Mean Share Price during buy-back
C= Mean Share Price 10 days after closing of buy-back
% Difference between B and C above = (C-B)/B x100.
As observed in the Table 4 the mean share prices of shares 10 days after
buy-back depicted positive signs in majority of the companies. The mean share
prices reacted positively in case of 46 companies (56%) after buy-back as
compared to mean share prices during buy-back and increased up to 25% in
case of 28 companies; and increased between 25 to 50% in case of 15
companies . At the same time, the mean share prices declined up to (-25%) in
case of 30 companies. In case of 6 companies the decline of the mean share
prices after buy-back as compared to mean share prices during buy-back
ranged between (-25%) to (-57.38%) i.e. Reliance Energy Ltd (-38.33%),
Goldiam International Ltd (-57.38%), Patni Computers Ltd (-33.37%),
Sasken Technologies Ltd (-29.28%), Rain Commodities Ltd (-32.39%) and
ANG Auto Ltd (-27.23%). Therefore the Ho: i.e. Mean share price during
buy-back = Mean share price after buyback is rejected.
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5.1.3 Comparison of mean share prices in pre and post buy-back
phase.
Table 5
Mean Share Prices 10 days after and 10 days before buy-back
Sr.
No. Name of Company
C
`̀̀̀
A
`̀̀̀ %
Diff.
1 Selan Exploration Technologies Ltd. 13.32 13.26 0.45
2 Great Eastern Shipping Ltd 27.95 34.84 -19.78
3 Raymonds Ltd 103.84 139.14 -25.37
4 Selan Exploration Technologies Ltd. 9.07 11.13 -18.51
5 Finolex Industries Ltd 26.97 19.11 41.13
6 Jayshree Tea and Industries Ltd 44.26 60.08 -26.33
7 Siemens Ltd 303.58 197.03 54.08
8 Winsome Yarns Ltd 6.77 6.29 7.63
9 Great Eastern Shipping Ltd 28.59 29.2 -2.09
10 Bombay Dyeing And Manufacturing Co. Ltd 48.57 40.24 20.70
11 Britannia Industries Ltd 607.73 555.74 9.36
12 OCL India Ltd 48.75 49.01 -0.53
13 Kesoram Industries Ltd 35.3 22.17 59.22
14 Exide Industries Ltd 89.81 57.5 56.19
15 Godrej Consumer Products Ltd 81.69 55.53 47.11
16 Heritage Food (India) Ltd (16) 27.12 23.22 16.80
17 G G Dandekar Machine Works 235.1 161.23 45.82
18 Hindalco Industries Ltd 629.9 715.9 -12.01
19 Blue Star Ltd 72.72 55.02 32.17
20 Selan Exploration Technologies Ltd. 8.51 10.47 -18.72
21 Winsome Yarns Ltd 7.29 6.39 14.08
22 Finolex Industries Ltd 40.11 31.53 27.21
23 Godrej Consumer Products Ltd 106.11 93.36 13.66
24 Britannia Industries Ltd 537.85 523.16 2.81
25 Venky’s (India) Ltd 53.99 46.38 16.41
26 Solitaire Machines Tools Ltd 3.73 2.98 25.17
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Sr.
No. Name of Company
C
`̀̀̀
A
`̀̀̀ %
Diff.
27 Bombay Dyeing And Manufacturing Co. Ltd 68.2 42.18 61.69
28 Sun Pharmaceuticals Ltd 513.81 600.68 -14.46
29 Godrej Consumer Products Ltd 142.94 100.83 41.76
30 Kesoram Industries Ltd 46.3 26.89 72.18
31 ECE Industries Ltd 50.18 28.13 78.39
32 Ace Software Exports Ltd 11.49 8.09 42.03
33 Fine- Line Circuits Ltd 4.22 3.83 10.18
34 Selan Exploration Technologies Ltd. 17.25 8.95 92.74
35 Mazda Ltd 10.95 8.92 22.76
36 Godrej Consumer Products Ltd 166.84 142.68 16.93
37 Godrej Consumer Products Ltd 277.06 176.42 57.05
38 Mastek Ltd 364.85 245.25 48.77
39 Avery India Ltd 43.56 35.57 22.46
40 Britannia Industries Ltd 629.39 589.98 6.68
41 Reliance Industries Ltd 901.94 530.39 70.05
42 DIL Ltd 333.37 200.89 65.95
43 Godrej Consumer Products Ltd 717.71 391.88 83.15
44 Glaxo Smithkline Pharmaceuticals Ltd 1428.45 725.62 96.86
45 Indiabulls Financial Services 188.13 162.88 15.50
46 Prime Securities Ltd 60.19 62.74 -4.06
47 SRF Ltd 235.7 199.94 17.89
48 Natco Pharma Ltd 116.2 112.33 3.45
49 Revathi Equipments Ltd 878.91 662.68 32.63
50 Gujarat Ambuja Exports Ltd 77.92 28.48 173.60
51 Ace Software Exports Ltd 16.54 16.08 2.86
52 MRO- Tek Ltd 45.30 46.59 -2.77
53 ICI India Ltd 496.66 502.62 -1.19
54 Hindustan Unilever Ltd 245.66 220.07 11.63
55 Madras Cements Ltd 3281.7 3685.86 -10.97
56 Reliance Energy Ltd 541.45 1365.69 -60.35
57 Reliance Infra Ltd 688.03 526.55 30.67
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Sr.
No. Name of Company
C
`̀̀̀
A
`̀̀̀ %
Diff.
58 Goldiam International Ltd 17.76 57.33 -69.02
59 Great Offshore Ltd 510.23 665.78 -23.36
60 Mastek Ltd 345.34 371.48 -7.04
61 SRF Ltd 83.11 122.81 -32.33
62 Patni Computers Ltd 137.79 226.22 -39.09
63 Gateway Distriparks Ltd 65.45 90.92 -28.01
64 Gujarat Fluorochemicals Ltd 74.02 191.55 -61.36
65 Sasken Communications Technologies Ltd 76.79 139.47 -44.94
66 Rain Commodities Ltd 88.1 193.01 -54.35
67 Surana Telecom and Power Ltd 17.24 28.85 -40.24
68 Godrej Consumer Products Ltd 120.7 117.45 2.77
69 Supreme Industries Ltd 113.32 106.2 6.70
70 E.I.D.Parry (India) Ltd 133.14 141.27 -5.75
71 ANG Auto Ltd 39.8 75.69 -47.42
72 DLF Ltd 251.81 311.37 -19.13
73 GSS America Infotech Ltd 175.11 124.51 40.64
74 Jindal Poly Films Ltd 259.36 147.58 75.74
75 L K P Finance Ltd 86.53 59.37 45.75
76 Mangalam Cement Ltd 134.86 48.66 177.15
77 Monnet Ispat Ltd 287.58 128.2 124.32
78 FDC Ltd 42.15 25.1 67.93
79 T V Today Network Ltd 94.26 56.18 67.78
80 Valiant Communications Ltd 28.37 22.31 27.16
81 Avantel Ltd 49.21 43.06 14.28
82 Godrej Industries Ltd 153.73 106.06 44.95
A= Mean Share Prices 10 days before buy-back
C= Mean Share Prices 10 days after buy-back
% Difference between A and C = (C-A)/A ×100
It is evident that the mean share prices after 10 days of buy-back increased in
case of 55 companies (67%) as compared to pre buy-back phase. The increase
104
was more than 100% in case of three companies namely, Gujarat Ambuja
Exports Ltd 173.60%, Mangalam Cement Ltd 177.15% and Monnet Ispat Ltd
124.32%. In case of 22 companies it increased up to 25%; in case of 15
companies it increased up to 50%; in case of 10 companies it increased up to
75% as compared to mean share prices before buy-back. At the same time, the
decline in mean share prices of Reliance Energy Ltd (-60.35%), Goldiam
International Ltd (-69.02%), Gujarat Fluorochemicals Ltd (-61.36%) and Rain
Commodities Ltd (-54.35%) was more than (-50%) after buy-back as
compared to mean share prices before buy-back while in case of 15 companies
the decline was between 0 to (-25%). Therefore, Ho: the mean share price after
buy-back = the share price before buy-back is rejected.
5.1.4 Phase-Wise Analysis of Share Price Movements
We can study the share price movements by dividing the period of study into
four phases based on global events: According to global events the first phase
is from 1999 to 2002 when the market remained dampen because of technology
meltdown (2000) and World Trade Centre (WTC); the second phase from
2004 to mid 2007, is characterized by the revival of private foreign capital
flows to emerging market economies in an environment of liberalization,
flexible exchange rates and strong economic growth, commonly known as
bull-run period; the third phase from 2007 to early 2009 also known as bear
phase, shows how severely stock market fell after the global subprime crisis;
the fourth phase from mid 2009 onwards is the revival stage.
During the first phase from 1999 to 2002 when market remained dampen
because of technology meltdown (2000) and WTC, majority of the buy-backs
i.e. 12 out of 18 showed a negative trend. Except for six companies
i.e. Seimens Ltd, Bombay Dyeing And Manufacturing Ltd, Kesoram Ltd,
Exide Industries Ltd, Godrej Consumer Products Ltd and Heritage Food (India)
Ltd, the mean share prices of 12 companies which offered and completed
buy-back during 2000-2002 declined during buyback period. The period
during which buy-back took place in case of seven companies out of 18
105
companies i.e Finolex Industries Ltd, Jayshree Tea and Industries Ltd,
Seimens Ltd, Great Eastern Shipping Co. Ltd, Bombay Dyeing and
Manufacturing Co. Ltd, Kesoram Ltd and Exide Industries Ltd were more than
9 months.
The second phase (2003 to mid 2007), is characterized by the revival of private
foreign capital flows to emerging market economies in an environment of
liberalization, flexible exchange rates and strong economic growth, commonly
known as bull-run period. This is reflected in the increase in the prices of the
companies which offered buy-back. Out of 45 companies, in case of only
2 companies, there was a decline in the mean share prices, while 43 companies
recorded an increase in the mean share prices. The mean share prices of Selan
Exploration Techonologies Ltd in April 2002-January 2003 gradually declined
in all three periods of buy-back and in case of Sun Pharmaceuticals Ltd the
mean share prices declined after the opening of the offer, increased during the
buy-back and finally recorded a decline over the mean share price before
buy -back.
The third phase (2007 to early 2009) is also known as bear phase, as stock
market fell after the global subprime crisis. 16 companies out of 18 companies
recorded a decline in the mean share prices during the bear phase. In case of
two companies the rise was marginal i.e. 2.77% in case of Godrej Consumer
Products Ltd and 6.70% in case of Supreme Industries Ltd.
The fourth phase from mid 2009 onwards shows the revival stage. The effect of
market is depicted in the difference in mean share prices of the companies
before and after buy-back of shares. The mean share prices increased by
177.15% in case of Mangalam Cement Ltd, and 124.32% in case of Monnet
Ispat Ltd. In case of 6 companies, the difference between the post buy-back and
pre-buy-back was more than 40%. The post buy-back bounce within a period
of six months benefited the share holders who did not participated in the
buy-back programme.
Inspite of all the efforts introduced by the companies to revive share prices
through buy-backs; we observed that during the bear phase following the
106
subprime crisis, the prices of shares recorded a negative trend up to May 2009
followed by a noticeable bounce back in the revival phase. The very purpose of
buy-back seemed to be fulfilled in the last phase which is to restore true value
of shares in a dampened market. Thus, we can conclude that merely signaling
effect of announcement of buy-back is not sufficient to make good the
undervaluation of shares, but an additional boost from the market is also
necessary.
107
5.1.5 Industry-wise trend of mean share price
Table 6
Industry-wise trend of Mean Share Price
Share price movements of the companies going in for buy-back are examined to know the industry-wise trend of mean share prices.
NIC CLASSIFED INDUSTRIES
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
A-AGRICULTURE, FORESTRY AND FISHING
50 Gujarat Ambuja Exports Ltd 28.48 41.3 77.92 45.01 88.67 173.60
B-MINING AND QUARRYING - COAL, SUPPORT ACTIVITIES FOR PETROLEUM
1 Selan Exploration Technologies Ltd. 13.26 11.08 13.32 -16.44 20.22 0.45
4 Selan Exploration Technologies Ltd. 11.13 11.05 9.07 -0.72 -17.92 -18.51
20 Selan Exploration Technologies Ltd. 10.47 9.51 8.51 -9.17 -10.52 -18.72
C-MANUFACTURING
1 - PACKAGED FOODS, FOOD PROCESSING.
11 Britannia Industries Ltd 555.74 531.58 607.73 -4.35 14.33 9.36
16 Heritage Food (India) Ltd (16) 23.22 25.71 27.12 10.72 5.48 16.80
24 Britannia Industries Ltd 523.16 517.62 537.85 -1.06 3.91 2.81
108
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
25 VENKY'S (INDIA) LTD. 46.38 47.27 53.99 1.92 14.22 16.41
40 Britannia Industries Ltd 589.98 621.14 629.39 5.28 1.33 6.68
2- BEVERAGES
6 Jayshree Tea and Industries Ltd 60.08 48.6 44.26 -19.11 -8.93 -26.33
3-SUGAR
70 E.I.D.Parry (India) Ltd 141.27 146.47 133.14 3.68 -9.10 -5.75
4 –TEXTILES
3 Raymonds Ltd 139.14 116.2 103.84 -16.49 -10.64 -25.37
8 Winsome Yarns Ltd 6.29 6.8 6.77 8.11 -0.44 7.63
10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 43.65 48.57 8.47 11.27 20.70
21 Winsome Yarns Ltd 6.39 7.27 7.29 13.77 0.28 14.08
27 Bombay Dyeing And Manufacturing Co. Ltd 42.18 53.28 68.2 26.32 28.00 61.69
41 Reliance Industries Ltd 530.39 655.36 901.94 23.56 37.63 70.05
47 SRF Ltd 199.94 216.74 235.70 8.40 8.75 17.89
61 SRF Ltd 122.81 93.03 83.11 -24.25 -10.66 -32.33
109
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
5-PLASTICS
5 Finolex Industries Ltd 19.11 27.04 26.97 41.50 -0.26 41.13
22 Finolex Industries Ltd 31.53 33.31 40.11 5.65 20.41 27.21
69 Supreme Industries Ltd 106.2 113.47 113.32 6.85 -0.13 6.70
6-PERSONAL PRODUCTS
15 Godrej Consumer Products Ltd 55.53 64.85 81.69 16.78 25.97 47.11
23 Godrej Consumer Products Ltd 93.36 109.17 106.11 16.93 -2.80 13.66
29 Godrej Consumer Products Ltd 100.83 114.22 142.94 13.28 25.14 41.76
36 Godrej Consumer Products Ltd 142.68 167.9 166.84 17.68 -0.63 16.93
37 Godrej Consumer Products Ltd 176.42 237.36 277.06 34.54 16.73 57.05
43 Godrej Consumer Products Ltd 391.88 502.84 717.71 28.31 42.73 83.15
68 Godrej Consumer Products Ltd 117.45 129.92 120.7 10.62 -7.10 2.77
54 Hindustan Unilever Ltd 220.07 223.96 245.66 1.77 9.69 11.63
7-COMMODITY CHEMICALS
74 Jindal Poly Films Ltd 147.58 250.91 259.36 70.02 3.37 75.74
82 Godrej Industries Ltd 106.06 133.04 153.73 25.44 15.55 44.95
110
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
8-INDUSTRIAL GASES
64 Gujarat Fluorochemicals Ltd 191.55 95.36 74.02 -50.22 -22.38 -61.36
9-PAINTS & VARNISHES
53 ICI India Ltd 502.62 536.83 496.66 6.81 -7.48 -1.19
10-PHARMECUETICALS
28 Sun Pharmaceuticals Ltd 600.68 350.4 513.81 -41.67 46.64 -14.46
42 DIL Ltd 200.89 240.31 333.37 19.62 38.72 65.95
44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 1037.2 1428.45 42.94 37.72 96.86
48 Natco Pharma Ltd 112.33 133.93 116.2 19.23 -13.24 3.45
78 FDC Ltd 25.1 34.36 42.15 36.89 22.67 67.93
11-IRON &STEEL&INTERMEDIATE PRODUCTS INTERMEDIATE PRODUCTS
77 Monnet Ispat Ltd 128.2 163.56 287.58 27.58 75.83 124.32
12-CONSUMER ELECTRONICS
19 Blue Star Ltd 55.02 67.55 72.72 22.77 7.65 32.17
13-HEAVY ELECTRICALS & ELECTRICAL UTILITIES
7 Siemens Ltd 197.03 227.42 303.58 15.42 33.49 54.08
111
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
31 ECE Industries Ltd 28.13 37.1 50.18 31.89 35.26 78.39
33 Fine- Line Circuits Ltd 3.83 5.26 4.22 37.34 -19.77 10.18
14-ENGINEERING, INDUSTRIAL MACHINERY & ALUMINIUM
17 G G Dandekar Machine Works 161.23 236.81 235.1 46.88 -0.72 45.82
18 Hindalco Industries Ltd 715.9 722.16 629.9 0.87 -12.78 -12.01
26 Solitaire Machines Tools Ltd 2.98 4.55 3.73 52.68 -18.02 25.17
35 Mazda Ltd 8.92 9.05 10.95 1.46 20.99 22.76
39 Avery India Ltd 35.57 39.92 43.56 12.23 9.12 22.46
49 Revathi Equipments Ltd 662.68 683 878.91 3.07 28.68 32.63
15-AUTO PARTS
14 Exide Industries Ltd 57.5 73.49 89.81 27.81 22.21 56.19
71 ANG Auto Ltd 75.69 54.69 39.8 -27.74 -27.23 -47.42
16-DIAMOND CUTTING & PRECIOUS METAL JEWELLERY
58 Goldiam International Ltd 57.33 41.67 17.76 -27.32 -57.38 -69.02
17-DIVERSIFED
13 Kesoram Industries Ltd 22.17 26.81 35.3 20.93 31.67 59.22
112
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
30 Kesoram Industries Ltd 26.89 33.34 46.3 23.99 38.87 72.18
18-CEMENT,CEMENT PRODUCTS & IRON
12 OCL India Ltd 49.01 53.87 48.75 9.92 -9.50 -0.53
55 Madras Cements Ltd 3685.86 3436.25 3281.7 -6.77 -4.50 -10.97
66 Rain Commodities Ltd 193.01 130.31 88.1 -32.49 -32.39 -54.35
76 Mangalam Cement Ltd 48.66 89.48 134.86 83.89 50.72 177.15
D-ELECTRICITY,GAS STEAM AND AIR CONDITIONING SUPPLY
56 Reliance Energy Ltd 1365.69 878.05 541.45 -35.71 -38.33 -60.35
57 Reliance Infra Ltd 526.55 507.22 688.03 -3.67 35.65 30.67
F-CONSTRUCTION & REAL ESTATE ACTIVITIES
72 DLF LTD 311.37 210.17 251.81 -32.50 19.81 -19.13
H-TRANSPORTATION AND STORAGE
1-SHIPPING
2 Great Eastern Shipping Ltd 34.84 31.87 27.95 -8.52 -12.30 -19.78
9 Great Eastern Shipping Ltd 29.2 28.77 28.59 -1.47 -0.63 -2.09
59 Great Offshore Ltd 665.78 537.75 510.23 -19.23 -5.12 -23.36
113
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
2-TRANSPORTATION & STORAGE
63 Gateway Distriparks Ltd 90.92 81.41 65.45 -10.46 -19.60 -28.01
J-INFORMATION AND COMMUNICATION
1-COMPUTER SOFTWARE PRODUCTION
32 Ace Software Exports Ltd 8.09 9.55 11.49 18.05 20.31 42.03
38 Mastek Ltd 245.25 330.29 364.85 34.67 10.46 48.77
51 Ace Software Exports Ltd 16.08 16.94 16.54 5.35 -2.36 2.86
60 Mastek Ltd 371.48 378.44 345.34 1.87 -8.75 -7.04
62 Patni Computers Ltd 226.22 206.81 137.79 -8.58 -33.37 -39.09
2-IT CONSULTING AND SOFTWARE
65 Sasken Communications Technologies Ltd 139.47 108.58 76.79 -22.15 -29.28 -44.94
73 GSS America Infotech Ltd 124.51 154.44 175.11 24.04 13.38 40.64
3-COMPUTER HARDWARE
52 MRO- Tek Ltd 46.59 46.21 45.30 -0.82 -1.97 -2.77
4-TELECOM CABLES & EQUIPMENTS
67 Surana Telecom and Power Ltd 28.85 20.82 17.24 -27.83 -17.20 -40.24
114
Sr.
No. Company
A
`̀̀̀
B
`̀̀̀
C
` ` ` `
(B-A)
x 100/A
(C-B)
x 100/B
(C-A)
x 100/A
80 Valiant Communications Ltd 22.31 22.34 28.37 0.13 26.99 27.16
81 Avantel Ltd 43.06 48.54 49.21 12.73 1.38 14.28
K- INFORMATION AND COMMUNICATION - BROADCASTING & CABLE T V
79 T V Today Network Ltd 56.18 85.62 94.26 52.40 10.09 67.78
L-FINANCIAL AND INSURANCE ACTIVITIES -
45 Indiabulls Financial Services 162.88 192.7 188.13 17.92 -2.05 15.50
46 Prime Securities Ltd 62.74 48.8 60.19 -22.22 23.34 -4.06
75 L K P Finance Ltd 59.37 77.86 86.53 31.14 11.14 45.75
A = Mean share prices before Buy-back
B = Mean share prices during Buy-back
C = Mean share prices after Buy-back
(B-A) ×100 =% Difference in mean share price before and during Buy-Back A
(C-B) ×100 =% Difference in mean share price during and after Buy-back C
(C-A) ×100 =% Difference in mean share price after and before Buy-back
A
115
Industries classified on the basis of NIC classification-wise reported a mixed
pattern of mean share prices movements before buy-back, during the buy-back
offer and after the closure of buy-back programme
A. Agriculture, Forestry and Fishing
Gujarat Ambuja Exports Ltd was the only company under this category which
declared and completed buy-back. It registered an abnormal gain of 173.60% in
mean share price after buy-back as compared to mean share price before
buy-back.
B. Mining and Quarrying
Under this industry, Selan Exploration Technologies Ltd completed four
buy-back programmes. It recorded a decline of more than 18% in mean share
prices during second and third buy-back programmes. However, in the first
buy-back there was a nominal rise of 0.45% and in the last buy-back there was
an increase of 92.74% in the mean share prices after buy-back.
C. Manufacturing Industries
1. Packaged Foods and Food Processing
As evident from Table 6, major manufacturing industries in Packaged Foods
and Food Processing registered a nominal gain up to 17%. In case of multiple
buy-backs by Britannia Industries Ltd the percentage gain in the mean share
prices was nominal i.e. 9.35%, 2.81% and 6.68% during first, second and third
buy-back respectively.
2. Beverages
The mean share prices of Jayshree Tea and Industries Ltd under this declined to
the extent of (-26.33%) after buy-back. Thus there was a negative trend in this
industry.
116
3. Sugar
The only company E.I.D.Parry (India) Ltd registered a rise of 3.68% in mean
share price during the buy-back offer but the mean share price declined by
(-5.75%) as compared to the mean share price before buy-back.
4. Textile Industries
In case of Textile Industries, especially Reliance Industries Ltd and double
buy-backs at different times by Winsome Yarns Ltd and Bombay Dyeing and
Manufacturing Co. Ltd reacted positively after buy-back. However, SRF Ltd.
which had reacted positively i.e. increase of 17.89% in the first buy-back
programme, recorded a decline of 32.32% in the second buy-back programme.
5. Plastics
In case of Plastic Industry, though there was a marginal decline of less than 1%
in mean share prices after buy-back as compared to mean share prices during
buy-back, the net effect of buy-back from offer date to closure date was
positive and it was more than 27% in case of double buy-back offer by Finolex
Industries Ltd.
6. Personal Products
Buy-back in personal products industries is featured by 7 different buy-backs
by Godrej Consumer Products Ltd. and only one by Hindustan Unilever Ltd. In
this industry after buy-back the net effect as depicted in mean share prices was
not only positive but was also noticeable i.e. on an average the gain in mean
share prices was more than 40% in 4 buy-backs by Godrej Consumer Products
Ltd and in case of other buy-backs by Godrej Consumer Products Ltd there was
a marginal increase of less than 15% in mean share prices. The shareholders
who did not participate in the buy-back programme stood to gain.
7. Commodity Chemicals
Both the companies recorded a handsome gain of over 44% over the mean
share prices before buy-back. Thus, the shareholders of Jindal Poly Films Ltd
117
and Godrej Industries Ltd who did not participate in the buy-back programme
gained as compared to those who participated in the buy-back programme.
8. Industrial Gases
The mean share prices of Gujarat Fluorochemicals Ltd under Industrial Gases
were discouraging to the extent of (-61.36%) and those who participated in the
programme gained than those who did not participate in the buy-back
programme.
9. Paints and Varnishes
ICI India Ltd was the only company who offered buy-back programme in this
industry. The mean share price increased during buy-back by 6.84%, but the
company recorded a marginal fall of (-1.19%) in mean share price after
buy-back as compared to mean share price before buy-back.
10. Pharmaceuticals
In case of Pharmaceuticals except for Sun Pharmaceuticals Ltd. and Natco
Pharma Ltd, all the companies recorded a handsome gain of over 65.95% over
the mean share prices before buy-back.
11. Iron and Steel and Intermediate Products
There was only one company Monnet Ispat Ltd under Iron and Steel and
Intermediate Products which resulted in an increase of 124.32% over the mean
share prices before buy-back.
12. Consumer Electronics
Only one company namely Blue Star Ltd which completed buy-back under this
industry gained moderately after buy-back as the mean share price after
buy-back increased by 32.17% over the mean share price before buy-back.
118
13. Heavy Electricals and Electrical Utilities
Both Siemens Ltd and ECE Industries Ltd recorded an increase of more than
50% in mean share prices after buy-back. However, Fine Line Circuits Ltd
gained a nominal rise of 10.18% over the mean share price before buy-back.
14. Engineering Industrial Machinery and Aluminum sector
Except for Hindalco Industries Ltd which registered a fall in the mean share
price of (-12.01%) after buy-back, there was a moderate rise of about 22% to
32.63% in the mean share prices of companies in the Engineering Industrial
Machinery and Aluminum sector.
15. Auto Parts Industry
Auto Parts Industry showed a mixed trend. While in the case of Exide
Industries Ltd the mean share prices rose up to 56.18%, in the case of ANG
Auto Ltd the mean share prices declined up to (-47.42%).
16. Diamond Cutting and Precious Metal Jewellery
The mean share prices in this industry since the opening of the offer of
buy-back were discouraging and Goldiam International Ltd under this industry
reacted negatively to the extent of (-69.02%) after buy-back.
17. Diversified Industries
Under Diversified Industries, Kesoram Ltd was the only company with two
different buy-backs and in both the cases, the mean share prices were positive
and reported an increase of 59% in the first and 72.20% in the second buy-back
respectively over the mean share prices before buy-back.
18. Cement
This industry showed a mixed trend. While the mean share prices of OCL India
Ltd and Madras Cement Ltd declined marginally up to (-10.97%) and Rain
Commodities Ltd declined up to (-54.35%), Mangalam Cement Ltd recorded a
119
rise of 177.15% after buy-back as compared to the mean share prices before
buy-back.
D. Electricity, Gas, Steam and Air - Conditioning Supply
There were multiple buy-backs by Reliance Energy Ltd and the mean share
prices reacted differently during the two buy-backs of the company. It declined
up to (-69.35%) in the first buy-back but gained 30.67% in the second
buy-back.
F. Construction and Real Estate
Though the mean share prices of DLF Ltd declined by (-32%) during buy-back
and gained by 19.81% after buy-back there was an overall decline of
(-19.13%) over the mean share price before buy-back.
H. Transportation and Storage
The mean share prices of the companies under this industry recorded a negative
trend and in all the buy-back events, the mean share prices declined after
opening of the offer. Great Eastern Shipping Ltd exhibited a marginal decline
of (-19%) and (-2.09%) in two different buy-backs respectively, but the decline
in case of two other companies was more than (-25%).
J. Information and Communication Sector
1. Computer Software Production
A mixed trend was noticed in 3 companies of Computer Software Production
industry. The mean share prices in 3 companies i.e Ace Software Exports Ltd
(42.03%) and Mastek Ltd (48.77%) in the first buy-back and Ace Software Ltd
in the second buy-back (2.86%) were positive after buy-back as compared to
the mean share prices before buy-back. The mean share prices of Mastek Ltd in
the second buy-back and Patni Computers Ltd were negative after buy-back.
120
2. IT Consulting and Software
While the mean share price of Sasken Communications Technologies Ltd
declined by (-44.94%) after buy-back the mean share prices of GSS
America Infotech Ltd increased by (40.64%) after buy-back.
3. Computer Hardware
MRO-Tek registered a nominal decline of (-2.77%) in mean share prices
after buy-back as compared to mean share prices before buy-back.
4. Telecom Cables and Equipments
Out of the three companies in this industry, the mean share prices of
Surana Telecom and Power Ltd declined after buy-back, while the mean
share prices of Valiant Communications Ltd and Avantel Ltd registered a
rise of more than 14%.
K. Information and Communication – Broadcasting and Cable T V
The mean share prices of T V Today Network Ltd under this industry reacted
positively in all the three periods of buy-back and the shareholders who did not
participate in the buy-back gained after buy-back.
L. Financial and Insurance Activities
Likewise, companies under Financial and Insurance activities showed a mixed
trend. The rise in mean share prices in case of LKP Finance Ltd was moderate
i.e. 45.73% and in case of Indiabulls Financial Services Ltd the rise in mean
share price was marginal 15.51% after buy-back. The only company in this
sector Prime Securities Ltd. reported a marginal decline of (-4.06%) in mean
share price after buy-back.
Thus, the companies which announced and completed buy-back depicted a
mixed pattern and not all companies exhibited similar trend. The industries that
gained in the buy-back programme include Agriculture Forestry, and Fishing,
Plastics, Personal Products, Commodity Chemicals, Iron and Steel,
121
Engineering Industrial Machinery and Aluminium, Diversified, Consumer
Electronics, Heavy Electrical and Electrical Utilities and Financial and
Insurance Activities. The industries that showed a negative trend included
Mining and Quarrying, Beverages, Transportation and Storage and Logistics.
5.2 The Effect of share Buy-backs on operating efficiency of the
companies.
Does the buy-back of share affect the operating efficiency of a company? An
effort has been made to find out whether companies offering buy-back increase
their operating efficiency or not. For this purpose, a comparison of the net
profit ratios, return on net worth ratios, current ratios, earnings per share (EPS)
and book values were considered. These ratios were calculated one year before
buy-back and one year after buy-back to know the increase or decrease in
operating efficiency.
5.2.1 Net Profit Ratio
Table 7
Net Profit Ratio
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
1 Selan Exploration Technologies Ltd. 3.08 10.95 255.52
2 Great Eastern Shipping Ltd 12.24 17.79 45.34
3 Raymonds Ltd 2.17 9.96 358.99
4 Selan Exploration Technologies Ltd. 2.03 11.92 487.19
5 Finolex Industries Ltd 5.4 10.81 100.19
6 Jayshree Tea and Industries Ltd -0.94 4.88 619.15
7 Siemens Ltd 5.93 9.77 64.76
8 Winsome Yarns Ltd 6.55 7.73 18.02
9 Great Eastern Shipping Ltd 17.69 22.62 27.87
10 Bombay Dyeing And Manufacturing Co. Ltd 2.16 3.7 71.3
122
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
11 Britannia Industries Ltd 5.49 7.65 39.34
12 OCL India Ltd 2.2 5.89 167.73
13 Kesoram Industries Ltd 43.13 46.62 8.09
14 Exide Industries Ltd 3.97 7.44 87.41
15 Godrej Consumer Products Ltd 9.03 11.19 23.92
16 Heritage Food (India) Ltd (16) 6.73 7.73 14.86
17 G G Dandekar Machine Works -30.38 27.01 188.91
18 Hindalco Industries Ltd 29.39 11.64 -60.39
19 Blue Star Ltd 5.44 4.68 -13.97
20 Selan Exploration Technologies Ltd. 10.95 7.56 -30.96
21 Winsome Yarns Ltd 4.75 1.53 -67.79
22 Finolex Industries Ltd 13.3 10.7 -19.55
23 Godrej Consumer Products Ltd 9.03 13.19 46.07
24 Britannia Industries Ltd 14.53 8.25 -43.22
25 Venky’s (India) Ltd 4.1 5.3 29.27
26 Solitaire Machines Tools Ltd 6.46 7.3 13
27 Bombay Dyeing And Manufacturing Co. Ltd -3.6 2.58 171.67
28 Sun Pharmaceuticals Ltd 29.17 0.3 -98.97
29 Godrej Consumer Products Ltd 11.19 15.92 42.27
30 Kesoram Industries Ltd 46.62 2.36 -94.94
31 ECE Industries Ltd 10.11 1.65 -83.68
32 Ace Software Exports Ltd 13.03 12.47 -4.3
33 Fine- Line Circuits Ltd 3.07 2.66 -13.36
34 Selan Exploration Technologies Ltd. 11.92 5.73 -51.93
35 Mazda Ltd 6.45 8.24 27.75
36 Godrej Consumer Products Ltd 11.19 15.92 42.27
37 Godrej Consumer Products Ltd 13.19 18.49 40.18
38 Mastek Ltd 10.35 12.74 23.09
39 Avery India Ltd 5.4 7.16 32.59
40 Britannia Industries Ltd 8.25 8.55 3.64
41 Reliance Industries Ltd 11.49 10.69 -6.96
123
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
42 DIL Ltd 45.32 476 950.31
43 Godrej Consumer Products Ltd 15.92 16.04 0.75
44 Glaxo Smithkline Pharmaceuticals Ltd 24.35 35.38 45.3
45 Indiabulls Financial Services 33.84 35.73 5.59
46 Prime Securities Ltd 88.6 38.23 -56.85
47 SRF Ltd 8.07 8.54 5.82
48 Natco Pharma Ltd 14.64 15.72 7.38
49 Revathi Equipments Ltd 13.29 17.22 29.57
50 Gujarat Ambuja Exports Ltd 3.34 1.94 -41.92
51 Ace Software Exports Ltd 9.49 18.22 91.99
52 MRO- Tek Ltd 9.55 2.65 -72.25
53 ICI India Ltd 50.51 32.5 -35.66
54 Hindustan Unilever Ltd 12.74 12.2 -4.24
55 Madras Cements Ltd 20.36 14.37 -29.42
56 Reliance Energy Ltd 17.13 11.74 -31.47
57 Reliance Infra Ltd 11.81 11.74 -0.59
58 Goldiam International Ltd -0.11 8.61 7927.27
59 Great Offshore Ltd 30.05 23.58 -21.53
60 Mastek Ltd 17.01 16.26 -4.41
61 SRF Ltd 8.54 14.15 65.69
62 Patni Computers Ltd 33.06 31.28 -5.38
63 Gateway Distriparks Ltd 45.58 48.69 6.82
64 Gujarat Fluorochemicals Ltd 44.44 33.9 -23.72
65 Sasken Communications Technologies Ltd 6.41 18.94 195.48
66 Rain Commodities Ltd 5.48 18.32 234.31
67 Surana Telecom and Power Ltd 15.42 2.41 -84.37
68 Godrej Consumer Products Ltd 16.61 19.47 17.22
69 Supreme Industries Ltd 3.9 7.22 85.13
70 E.I.D.Parry (India) Ltd -2.55 17.89 801.57
71 ANG Auto Ltd 11.9 6.79 -42.94
72 DLF Ltd 46.83 28.03 -40.15
124
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
73 GSS America Infotech Ltd 64.96 28.78 -55.7
74 Jindal Poly Films Ltd 10.52 13.11 24.62
75 L K P Finance Ltd 86.75 60.5 -30.26
76 Mangalam Cement Ltd 17.22 19.36 12.43
77 Monnet Ispat Ltd 14.34 18.17 26.71
78 FDC Ltd 13.39 22.91 71.1
79 T V Today Network Ltd 13.42 10.83 -19.3
80 Valiant Communications Ltd 20.43 10.64 -47.92
81 Avantel Ltd 9.83 5.71 -41.91
82 Godrej Industries Ltd 2.3 9.94 332.17
% Difference = % difference in net profit ratios before buy-back and after
buy-back
The net profit margin ratio of a company is indicative of management’s ability
to operate the business with sufficient success to leave a reasonable
compensation to the owners for providing their capital at risk. A high net profit
ratio would ensure adequate return to the owners as well as enable a firm to
withstand adverse economic conditions when selling price is declining, cost of
production is rising and demand for product is falling. A lower net profit ratio
has opposite implications.
The net profit ratios of companies before and after buy-back as shown in Table
7 revealed that 59.76% of the company buy-backs registered a rise in net profit
ratio after buy-back. Out of these companies 4 companies namely Jayshree
Tea and Industries Ltd, E I D Parry (India) Ltd, Dil Ltd and Goldiam
International Ltd, registered a rise of more than 500% after buy-back.
However, 22 companies registered a decline up to 50% in net profit ratio. Also
there was a decline of more than 75% in 4 companies only - Sun
Pharmaceuticals Ltd (-98.97%), Kesoram Industries Ltd (-94.94%), Surana
Telecom and Power Ltd (-84.37%) and ECE Industries Ltd (-83.68%).
125
5.2.2 Return on Net Worth
Table 8
Return on Net worth Ratio
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
1 Selan Exploration Technologies Ltd. 0.7 3 328.57
2 Great Eastern Shipping Ltd 9.79 16.56 69.15
3 Raymonds Ltd 3.92 9.84 151.02
4 Selan Exploration Technologies Ltd. 0.56 4.45 694.64
5 Finolex Industries Ltd 7.91 18.88 138.69
6 Jayshree Tea and Industries Ltd -1.07 5.94 655.14
7 Siemens Ltd 21.41 28.38 32.55
8 Winsome Yarns Ltd 10.77 11.75 9.10
9 Great Eastern Shipping Ltd 14.96 17.33 15.84
10 Bombay Dyeing And Manufacturing Co. Ltd 2.76 9.14 231.16
11 Britannia Industries Ltd 29.38 25.35 -13.72
12 OCL India Ltd 4.09 12.75 211.74
13 Kesoram Industries Ltd 12.73 8.31 -34.72
14 Exide Industries Ltd 9.24 18.37 98.81
15 Godrej Consumer Products Ltd 78.95 116.97 48.16
16 Heritage Food (India) Ltd (16) 31.82 33.49 5.25
17 G G Dandekar Machine Works -16.04 13.73 185.60
18 Hindalco Industries Ltd 0.12 0.09 -25.00
19 Blue Star Ltd 24.64 25 1.46
20 Selan Exploration Technologies Ltd. 3 2.44 -18.67
21 Winsome Yarns Ltd 7.01 2.79 -60.20
22 Finolex Industries Ltd 15.57 19.47 25.05
23 Godrej Consumer Products Ltd 78.95 153.12 93.95
24 Britannia Industries Ltd 54.94 27.56 -49.84
25 Venky’s (India) Ltd 14.64 18.55 26.71
26 Solitaire Machines Tools Ltd 3.3 6.24 89.09
27 Bombay Dyeing And Manufacturing Co. Ltd -8.7 12.47 243.33
126
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
28 Sun Pharmaceuticals Ltd 33.24 27.65 -16.82
29 Godrej Consumer Products Ltd 116.97 179.72 53.65
30 Kesoram Industries Ltd 8.31 8.89 6.98
31 ECE Industries Ltd 10.95 1.74 -84.11
32 Ace Software Exports Ltd 5.49 5.42 -1.28
33 Fine- Line Circuits Ltd 5.06 5.8 14.62
34 Selan Exploration Technologies Ltd. 4.45 2.71 -39.10
35 Mazda Ltd 12.22 25.66 109.98
36 Godrej Consumer Products Ltd 116.97 179.72 53.65
37 Godrej Consumer Products Ltd 153.12 159.16 3.94
38 Mastek Ltd 9.55 24.3 154.45
39 Avery India Ltd 11.84 12.58 6.25
40 Britannia Industries Ltd 27.56 26.67 -3.23
41 Reliance Industries Ltd 18.74 18.67 -0.37
42 DIL Ltd 7.07 6.77 -4.24
43 Godrej Consumer Products Ltd 179.72 110.04 -38.77
44 Glaxo Smithkline Pharmaceuticals Ltd 36.04 45.66 26.69
45 Indiabulls Financial Services 12.65 23.83 88.38
46 Prime Securities Ltd 44.48 16.23 -63.51
47 SRF Ltd 17.47 14.28 -18.26
48 Natco Pharma Ltd 22.81 16.57 -27.36
49 Revathi Equipments Ltd 11.94 18.58 55.61
50 Gujarat Ambuja Exports Ltd 15.41 10.28 -33.29
51 Ace Software Exports Ltd 3.72 3.56 -4.30
52 MRO- Tek Ltd 11.63 3.52 -69.73
53 ICI India Ltd 51.56 30.34 -41.16
54 Hindustan Unilever Ltd 122.92 121.3 -1.32
55 Madras Cements Ltd 42.8 28.85 -32.59
56 Reliance Energy Ltd 9.28 7.6 -18.10
57 Reliance Infra Ltd 9.56 7.6 -20.50
127
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
58 Goldiam International Ltd -0.06 3.3 5600.00
59 Great Offshore Ltd 22.88 30.48 33.22
60 Mastek Ltd 34.02 27.35 -19.61
61 SRF Ltd 14.28 24.4 70.87
62 Patni Computers Ltd 15.15 16.94 11.82
63 Gateway Distriparks 11.61 11.55 -0.52
64 Gujarat Fluorochemicals Ltd 32.3 21.86 -32.32
65 Sasken Communications Technologies Ltd 5.83 15.75 170.15
66 Rain Commodities Ltd 6.86 24.94 263.56
67 Surana Telecom and Power Ltd 10.37 1.67 -83.90
68 Godrej Consumer Products Ltd 98.43 29.99 -69.53
69 Supreme Industries Ltd 20.39 38.29 87.79
70 E.I.D.Parry (India) Ltd -3.24 18.72 677.78
71 ANG Auto Ltd 18.9 7.89 -58.25
72 DLF Ltd 22.84 5.96 -73.91
73 GSS America Infotech Ltd 15.03 4.87 -67.60
74 Jindal Poly Films Ltd 14.52 19.49 34.23
75 L K P Finance Ltd 68.76 13.87 -79.83
76 Mangalam Cement Ltd 33.01 30.71 -6.97
77 Monnet Ispat Ltd 15.26 16.26 6.55
78 FDC Ltd 17.52 28.39 62.04
79 T V Today Network Ltd 10.43 10.12 -2.97
80 Valiant Communications Ltd 6.3 3.66 -41.90
81 Avantel Ltd 14.53 7.77 -46.52
82 Godrej Industries Ltd 1.82 7.91 334.62
% Difference = % difference between return on net worth before buy-back and
after buy-back.
Return on net worth is one of the most important ratio used for measuring the
overall efficiency of a firm. This ratio is of great importance to the present and
128
prospective shareholders as well as the management of the company. This ratio
reveals how well the resources of the firm are being used. Higher the ratio
better is the overall efficiency of the company. The shareholders are the real
owners of the company and they are ultimately affected in the buy-back
programme and hence, the return on net worth of the company should be
assessed.
Table 8 reveals that 43 companies (52%) recorded an increase in net worth
after buy-back and in 4 cases – Selan Exploration Technologies Ltd, Jayshree
Tea and Industries Ltd, E I D Parry (India) Ltd, and Goldiam International Ltd
the increase in net worth was more than 500% as compared to the net worth of
the companies before buy-back. At the same time, in 39 cases there was a
decline in return on net worth. A decline of more than 75% was noticed in ECE
Industries Ltd, Surana Telecom and Power Ltd, and LKP Finance Ltd.
5.2.3 Current Ratio
Table 9
Current Ratio
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
1 Selan Exploration Technologies Ltd. 1.33 1.7 27.82
2 Great Eastern Shipping Ltd 2.37 1.78 -24.89
3 Raymonds Ltd 2.95 2.68 -9.15
4 Selan Exploration Technologies Ltd. 2.04 1.25 -38.73
5 Finolex Industries Ltd 1.79 1.13 -36.87
6 Jayshree Tea and Industries Ltd 4.16 2.16 -48.08
7 Siemens Ltd 1.1 1.31 19.09
8 Winsome Yarns Ltd 9.38 5.54 -40.94
9 Great Eastern Shipping Ltd 2.24 1.68 -25.00
10 Bombay Dyeing And Manufacturing Co. Ltd 4.77 1.83 -61.64
11 Britannia Industries Ltd 1.12 1.35 20.54
12 OCL India Ltd 3.1 1.86 -40.00
13 Kesoram Industries Ltd 2.22 1.25 -43.69
129
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
14 Exide Industries Ltd 1.87 1.36 -27.27
15 Godrej Consumer Products Ltd 0.8 0.73 -8.75
16 Heritage Food (India) Ltd (16) 1.12 1.33 18.75
17 G G Dandekar Machine Works 4.13 3.37 -18.40
18 Hindalco Industries Ltd 2.08 1.63 -21.63
19 Blue Star Ltd 1.3 1.34 3.08
20 Selan Exploration Technologies Ltd. 1.7 1.33 -21.76
21 Winsome Yarns Ltd 8.9 1.93 -78.31
22 Finolex Industries Ltd 0.96 1.01 5.21
23 Godrej Consumer Products Ltd 0.8 0.7 -12.50
24 Britannia Industries Ltd 1.31 1.02 -22.14
25 Venky’s (India) Ltd 1.39 1.46 5.04
26 Solitaire Machines Tools Ltd 2.24 1.53 -31.70
27 Bombay Dyeing And Manufacturing Co. Ltd 1.68 2.88 71.43
28 Sun Pharmaceuticals Ltd 2.78 5.68 104.32
29 Godrej Consumer Products Ltd 0.73 0.7 -4.11
30 Kesoram Industries Ltd 1.25 1.53 22.40
31 ECE Industries Ltd 2.74 4.12 50.36
32 Ace Software Exports Ltd 14.26 4.93 -65.43
33 Fine- Line Circuits Ltd 6.42 2.46 -61.68
34 Selan Exploration Technologies Ltd. 1.74 2.04 17.24
35 Mazda Ltd 1.56 1.85 18.59
36 Godrej Consumer Products Ltd 0.73 0.7 -4.11
37 Godrej Consumer Products Ltd 0.7 0.71 1.43
38 Mastek Ltd 1.23 1.19 -3.25
39 Avery India Ltd 0.65 1.13 73.85
40 Britannia Industries Ltd 1.02 1.1 7.84
41 Reliance Industries Ltd 1.32 1.17 -11.36
42 DIL Ltd 8.36 2.43 -70.93
43 Godrej Consumer Products Ltd 0.7 0.84 20.00
44 Glaxo Smithkline Pharmaceuticals Ltd 1.12 0.94 -16.07
130
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
45 Indiabulls Financial Services 7.07 4.09 -42.15
46 Prime Securities Ltd 1.3 9.2 607.69
47 SRF Ltd 1.01 1.18 16.83
48 Natco Pharma Ltd 2.06 2.04 -0.97
49 Revathi Equipments Ltd 2.36 4.36 84.75
50 Gujarat Ambuja Exports Ltd 3.29 1.46 -55.62
51 Ace Software Exports Ltd 5.85 19.85 239.32
52 MRO- Tek Ltd 2.63 3.18 20.91
53 ICI India Ltd 0.81 0.79 -2.47
54 Hindustan Unilever Ltd 0.69 1.01 46.38
55 Madras Cements Ltd 1.02 0.98 -3.92
56 Reliance Energy Ltd 2.47 1.73 -29.96
57 Reliance Infra Ltd 1.55 1.73 11.61
58 Goldiam International Ltd 7 4.52 -35.43
59 Great Offshore Ltd 2.76 2.14 -22.46
60 Mastek Ltd 1.17 1.09 -6.84
61 SRF Ltd 1.18 1.21 2.54
62 Patni Computers Ltd 1.65 1.4 -15.15
63 Gateway Distriparks Ltd 4.96 3.55 -28.43
64 Gujarat Fluorochemicals Ltd 1.27 1.25 -1.57
65 Sasken Communications Technologies Ltd 3.27 1.94 -40.67
66 Rain Commodities Ltd 1.23 1.7 38.21
67 Surana Telecom and Power Ltd 3.53 8.86 150.99
68 Godrej Consumer Products Ltd 0.92 1.38 50.00
69 Supreme Industries Ltd 0.97 0.99 2.06
70 E.I.D.Parry (India) Ltd 2.07 1.3 -37.20
71 ANG Auto Ltd 5.44 3.97 -27.02
72 DLF Ltd 4.85 5.47 12.78
73 GSS America Infotech Ltd 13.7 23.65 72.63
74 Jindal Poly Films Ltd 1.1 1.23 11.82
75 L K P Finance Ltd 3.72 2.92 -21.51
131
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
76 Mangalam Cement Ltd 1.05 1.18 12.38
77 Monnet Ispat Ltd 3.57 2.94 -17.65
78 FDC Ltd 1.41 1.12 -20.57
79 T V Today Network Ltd 4.06 4.41 8.62
80 Valiant Communications Ltd 14.46 9.21 -36.31
81 Avantel Ltd 2.65 4.28 61.51
82 Godrej Industries Ltd 1.71 1.39 -18.71
% Difference = % difference in current ratio before buy-back and after
buy-back
The current ratio of a company is the ratio of total current assets to current
liabilities and it measures short-term solvency, i.e. the ability of the company to
meet short-term obligations and is a margin of safety to the creditors.
Industry-wise the current ratios differ and depend on the working capital policy
and financial strategy of the company. Buy-back of shares affect the short-term
liquidity position of companies.
It is found that the general liquidity position of the companies as indicated in
Table 9, increased in the case of 36 companies after buy-back. In case of 46
companies there was a decline in current ratio, but the ratios after buy-back
were more than 1.This is a positive indication to the creditors. Inspite of
buy-back programme, the short term liquidity was not affected adversely.
132
5.2.4. Earnings per Share (EPS)
Table 10
Earnings per Share
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
1 Selan Exploration Technologies Ltd. 0.74 4.61 522.97
2 Great Eastern Shipping Ltd 4.27 9.78 129.04
3 Raymonds Ltd 4.22 14.36 240.28
4 Selan Exploration Technologies Ltd. 0.88 0.5 -43.18
5 Finolex Industries Ltd 2.57 6.35 147.08
6 Jayshree Tea and Industries Ltd -1.42 7.5 628.17
7 Siemens Ltd 20.44 42.06 105.77
8 Winsome Yarns Ltd 2.66 3.58 34.59
9 Great Eastern Shipping Ltd 8.04 10.87 35.20
10 Bombay Dyeing And Manufacturing Co. Ltd 4.42 8.28 87.33
11 Britannia Industries Ltd 25.33 38.28 51.13
12 OCL India Ltd 8.54 25.68 200.70
13 Kesoram Industries Ltd 8.61 6.13 -28.80
14 Exide Industries Ltd 8.79 10.23 16.38
15 Godrej Consumer Products Ltd 7.1 9.24 30.14
16 Heritage Food (India) Ltd (16) 10.3 14.93 44.95
17 G G Dandekar Machine Works -50.66 47.59 193.94
18 Hindalco Industries Ltd 92.12 62.95 -31.67
19 Blue Star Ltd 14.22 18.1 27.29
20 Selan Exploration Technologies Ltd. 4.61 0.57 -87.64
21 Winsome Yarns Ltd 1.88 0.68 -63.83
22 Finolex Industries Ltd 4.6 7.29 58.48
23 Godrej Consumer Products Ltd 7.1 11.41 60.70
24 Britannia Industries Ltd 75.67 47.31 -37.48
25 Venky’s (India) Ltd 10.52 17.17 63.21
26 Solitaire Machines Tools Ltd 0.4 0.81 102.50
27 Bombay Dyeing And Manufacturing Co. Ltd -7.42 6.88 192.72
28 Sun Pharmaceuticals Ltd 24.83 16.48 -33.63
133
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
29 Godrej Consumer Products Ltd 9.24 15.83 71.32
30 Kesoram Industries Ltd 6.13 7.33 19.58
31 ECE Industries Ltd 17.43 2.86 -83.59
32 Ace Software Exports Ltd 1.11 1.2 8.11
33 Fine- Line Circuits Ltd 0.77 1.05 36.36
34 Selan Exploration Technologies Ltd. 0.5 0.83 66.00
35 Mazda Ltd 2.2 6.96 216.36
36 Godrej Consumer Products Ltd 9.24 15.83 71.32
37 Godrej Consumer Products Ltd 11.41 21.47 88.17
38 Mastek Ltd 8.83 17.51 98.30
39 Avery India Ltd 3.64 4.77 31.04
40 Britannia Industries Ltd 47.31 61.29 29.55
41 Reliance Industries Ltd 54.34 85.71 57.73
42 DIL Ltd 21.07 20.77 -1.42
43 Godrej Consumer Products Ltd 15.83 5.4 -65.89
44 Glaxo Smithkline Pharmaceuticals Ltd 38.15 64.4 68.81
45 Indiabulls Financial Services 3.85 23.56 511.95
46 Prime Securities Ltd 6.61 7.62 15.28
47 SRF Ltd 16.24 20.44 25.86
48 Natco Pharma Ltd 8.76 15.24 73.97
49 Revathi Equipments Ltd 39.84 71.56 79.62
50 Gujarat Ambuja Exports Ltd 3.36 2.25 -33.04
51 Ace Software Exports Ltd 0.83 1.05 26.51
52 MRO- Tek Ltd 5.17 1.74 -66.34
53 ICI India Ltd 109.72 77.38 -29.48
54 Hindustan Unilever Ltd 8.12 11.47 41.26
55 Madras Cements Ltd 343.02 15.28 -95.55
56 Reliance Energy Ltd 46.04 47.03 2.15
57 Reliance Infra Ltd 50.38 47.03 -6.65
58 Goldiam International Ltd -0.04 2.05 5225.00
59 Great Offshore Ltd 51.09 53.21 4.15
60 Mastek Ltd 35.92 35.56 -1.00
134
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-
Back
%
Diff.
61 SRF Ltd 20.44 51.14 150.20
62 Patni Computers Ltd 27.88 42.03 50.75
63 Gateway Distriparks Ltd 6.51 7.16 9.98
64 Gujarat Fluorochemicals Ltd 27.64 30.42 10.06
65 Sasken Communications Technologies Ltd 8.73 28.04 221.19
66 Rain Commodities Ltd 7.89 21.83 176.68
67 Surana Telecom and Power Ltd 4.07 0.55 -86.49
68 Godrej Consumer Products Ltd 6.56 8.05 22.71
69 Supreme Industries Ltd 18.5 57.01 208.16
70 E.I.D.Parry (India) Ltd -1.86 23.77 1377.96
71 ANG Auto Ltd -12.82 5.78 145.09
72 DLF Ltd 15.1 4.51 -70.13
73 GSS America Infotech Ltd 26.93 9.76 -63.76
74 Jindal Poly Films Ltd 47.19 90.52 91.82
75 L K P Finance Ltd 66.73 14.69 -77.99
76 Mangalam Cement Ltd 34.66 44.51 28.42
77 Monnet Ispat Ltd 34.62 51.5 48.76
78 FDC Ltd 3.43 7.99 132.94
79 T V Today Network Ltd 5.79 5.34 -7.77
80 Valiant Communications Ltd 2.3 1.45 -36.96
81 Avantel Ltd 4.91 2.63 -46.44
82 Godrej Industries Ltd 0.58 2.55 339.66
% Difference = % Difference between EPS before and after buy-back
EPS measures the profit available to shareholders per share and a comparison
between earnings per share before and after buy-back highlights the return to
the shareholders.
As observed in Table 10, there was a rise in EPS of 58 companies after
buy-backs. It is significant to note that in 11 cases, EPS increased by more than
200% and 5 cases reported a rise in EPS of more than 500%. However, 24
cases recorded a decline in EPS. The decline in EPS of 10 cases was more than
135
50% as compared to EPS before buy-back. The companies which were hard hit
included companies from computer hardware, telecom cables and equipments,
broadcasting, real estate industries etc. which announced buy-back during
subprime global crisis.
5.2.5. Book Value
Table 11
Book Value
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-Back
%
Diff.
1 Selan Exploration Technologies Ltd. 15.62 23.49 50.38
2 Great Eastern Shipping Ltd 43.58 53.46 22.67
3 Raymonds Ltd 107.62 145.85 35.52
4 Selan Exploration Technologies Ltd. 14.97 15.02 0.33
5 Finolex Industries Ltd 32.5 33.64 3.51
6 Jayshree Tea and Industries Ltd 118.65 112.77 -4.96
7 Siemens Ltd 95.46 148.18 55.23
8 Winsome Yarns Ltd 24.66 30.43 23.40
9 Great Eastern Shipping Ltd 50.1 61.71 23.17
10 Bombay Dyeing And Manufacturing Co. Ltd 160.18 90.59 -43.44
11 Britannia Industries Ltd 86.22 151 75.13
12 OCL India Ltd 200.93 194.51 -3.20
13 Kesoram Industries Ltd 66.46 70.89 6.67
14 Exide Industries Ltd 74.64 47.03 -36.99
15 Godrej Consumer Products Ltd 8.99 7.9 -12.12
16 Heritage Food (India) Ltd (16) 32.38 44.56 37.62
17 G G Dandekar Machine Works 316.37 346.97 9.67
18 Hindalco Industries Ltd 615.25 669.44 8.81
19 Blue Star Ltd 57.72 72.37 25.38
20 Selan Exploration Technologies Ltd. 23.49 15.62 -33.50
21 Winsome Yarns Ltd 26.82 24.48 -8.72
22 Finolex Industries Ltd 29.57 37.46 26.68
23 Godrej Consumer Products Ltd 8.99 7.45 -17.13
136
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-Back
%
Diff.
24 Britannia Industries Ltd 137.74 171.64 24.61
25 Venky’s (India) Ltd 71.88 92.58 28.80
26 Solitaire Machines Tools Ltd 12.13 13.04 7.50
27 Bombay Dyeing And Manufacturing Co. Ltd 85.26 88.63 3.95
28 Sun Pharmaceuticals Ltd 73.14 59.51 -18.64
29 Godrej Consumer Products Ltd 7.9 8.81 11.52
30 Kesoram Industries Ltd 70.89 80.39 13.40
31 ECE Industries Ltd 150.63 157.12 4.31
32 Ace Software Exports Ltd 19.87 22.31 12.28
33 Fine- Line Circuits Ltd 15.01 18.25 21.59
34 Selan Exploration Technologies Ltd. 15.02 16.38 9.05
35 Mazda Ltd 18.05 27.04 49.81
36 Godrej Consumer Products Ltd 7.9 8.81 11.52
37 Godrej Consumer Products Ltd 7.45 13.49 81.07
38 Mastek Ltd 92.38 72.04 -22.02
39 Avery India Ltd 30.74 37.91 23.32
40 Britannia Industries Ltd 171.64 229.84 33.91
41 Reliance Industries Ltd 270.35 439.57 62.59
42 DIL Ltd 297.97 306.55 2.88
43 Godrej Consumer Products Ltd 8.81 4.91 -44.27
44 Glaxo Smithkline Pharmaceuticals Ltd 105.84 141.05 33.27
45 Indiabulls Financial Services 33.65 81.82 143.15
46 Prime Securities Ltd 14.86 46.32 211.71
47 SRF Ltd 83.03 134.56 62.06
48 Natco Pharma Ltd 54.35 91.97 69.22
49 Revathi Equipments Ltd 332.64 384.04 15.45
50 Gujarat Ambuja Exports Ltd 21.78 21.85 0.32
51 Ace Software Exports Ltd 22.58 29.44 30.38
52 MRO- Tek Ltd 44.44 49.49 11.36
53 ICI India Ltd 212.42 254.69 19.90
54 Hindustan Unilever Ltd 6.61 9.45 42.97
137
Sr.
No. Name of Company
Before
Buy-
Back
After
Buy-Back
%
Diff.
55 Madras Cements Ltd 801.38 52.96 -93.39
56 Reliance Energy Ltd 435.51 574.81 31.99
57 Reliance Infra Ltd 465.97 574.81 23.36
58 Goldiam International Ltd 64.56 62.08 -3.84
59 Great Offshore Ltd 193.6 186.49 -3.67
60 Mastek Ltd 105.57 130 23.14
61 SRF Ltd 134.56 200.24 48.81
62 Patni Computers Ltd 184.01 247.18 34.33
63 Gateway Distriparks Ltd 56.05 61.94 10.51
64 Gujarat Fluorochemicals Ltd 85.57 139.13 62.59
65 Sasken Communications Technologies Ltd 149.9 176.11 17.48
66 Rain Commodities Ltd 99.86 87.56 -12.32
67 Surana Telecom and Power Ltd 32.18 33.06 2.73
68 Godrej Consumer Products Ltd 6.66 26.85 303.15
69 Supreme Industries Ltd 89.66 148.86 66.03
70 E.I.D.Parry (India) Ltd 56.72 126.29 122.66
71 ANG Auto Ltd 67.36 69.14 2.64
72 DLF Ltd 66.1 75.59 14.36
73 GSS America Infotech Ltd 179.24 200.27 11.73
74 Jindal Poly Films Ltd 324.91 464.46 42.95
75 L K P Finance Ltd 95.53 105.99 10.95
76 Mangalam Cement Ltd 103.12 142.98 38.65
77 Monnet Ispat Ltd 222.5 311.06 39.80
78 FDC Ltd 19.55 28.14 43.94
79 T V Today Network Ltd 55.42 52.56 -5.16
80 Valiant Communications Ltd 36.34 39.58 8.92
81 Avantel Ltd 30.26 33.7 11.37
82 Godrej Industries Ltd 31.68 31.79 0.35
Book value per share is calculated by subtracting liabilities and the par value of
any outstanding preferred stock from assets and dividing the remainder by the
138
number of outstanding shares of stock. It is fundamental value per share which
is not dictated by the demand and supply of shares. An increase in book value
highlights increase in shareholders’ wealth.
It is found in Table 11 that in 66 cases of buy-backs the book value of
companies increased after buy-back. In 4 cases, the increase in book value was
more than 100% and in 17 cases the increase in book value ranged between 25
to 50%. However, there was a decline in the book value after buy-back in 16
cases and the decline ranged between 0 to (-25%).
Thus we can conclude that in more than 55% of the companies the overall
performance of the companies improved after buy-back.
5.2.6 Industry-Wise Performance
Industry-wise performance of companies that completed buy-back is as
follows:-
A - Agriculture, Forestry and Fishing
The results of Ambuja Exports Ltd were discouraging after buy-back. There
was a decline in the net profit ratio, return on net worth, current ratio and
earnings per share after buy-back.
B -Mining and Quarrying
This industry depicted a mixed trend. Of the multiple buy-backs by Selan
Exploration Technologies Ltd, during the first two buy-backs the results were
not only positive but were promising to the extent of a rise in net profit ratio
and return on net worth by more than 250%. However, the results of other two
buy-backs were discouraging.
C -Manufacturing
1. Packaged foods, and food packaging
The results of this industry one year after buy-back were positive in four out of
five programmes including 3 multiple buy-backs by Britannia Industries Ltd.
The increase in net profit ratio, current ratio, earnings per share and book value
depicted a positive trend. Though there was a decline in return on net worth
139
ratio in case of Britannia Industries Ltd the overall performance of the
company after buy-back was satisfactory.
2. Beverages
Jayshree Tea and Industries Ltd was the only company under this industry
which offered buy-back of shares. The company recorded a rise in net profit
ratio, return on net worth and earnings per share of more than 600% and
performed well after buy-back. Though there was a decline in current ratio
from 4.16 to 2.16, the company’s the overall performance after buy-back was
satisfactory.
3. Sugar
This industry performed well after buy-back as E.I.D.Parry (India) Ltd
recorded a rise of 802.38% in net profit margin, 678.37% in return on net
worth, and 1377.96% in earnings per share.
4. Textiles
Except for Winsome Yarns Ltd and Reliance Industries Ltd, all the companies
performed well after buy-back as seen in the increase in net profit ratio, net
worth ratio and earnings per share. The current ratios of the companies
declined after buy-back, but there was an increase in book value of all the
companies in this industry.
5. Plastics
The net profit ratio of Finolex Industries Ltd declined after buy-back in only
one of the two buy-backs. However, the overall performance as noticed in
return on net worth, current ratio, earnings per share and book value of the
industry as a whole was encouraging.
6. Personal Products
Except for Hindustan Unilever Ltd, there was a rise in net profit ratios in all
buy-backs which included seven buy-backs by Godrej Consumer Products Ltd.
However, the earnings per share in case of all buy-backs increased except in
140
case of one buy-back by Godrej Consumer Products Ltd. The overall
performance inspite of multiple buy-backs was favourable.
7. Commodity Chemicals
This industry registered a positive performance by both the companies after
buy-back and in case of Godrej Industries Ltd there was a rise of more than
300% in net profit and earnings per share. There was a rise in the return on net
worth and book value of shares after buy-back.
8. Industrial Gases
The results of Gujarat Flourochemicals Ltd in this industry were discouraging.
The companies did not perform well after buy-back. There was a decline in the
net profit ratio and return on net worth by (-23.70%) and (-32.31%)
respectively after buy-back.
9. Paints and Varnishes
ICI India Ltd under this industry recorded a decline in net profit margin
(-35.64%), return on net worth (-41.17%) and earnings per share (-29.48%)
after buy-back, Hence the results of this industry were discouraging.
10. Pharmaceuticals
A mixed trend is noticed in this industry. While Sun Pharmaceuticals Ltd
registered a decline of (-98.97%) in net profit, (-16.82%) in return on net worth
and (-33.63%) in earnings per share, the net profit ratio of DIL Ltd increased
by 950.31%. The performance of other companies under this industry was also
positive. There was an increase in book value and the current ratio was
satisfactory.
11. Iron and Steel and Intermediate Products
Monnet Ispat Ltd the only company under this industry performed well. There
was an increase of 26.71% in net profit ratio, 6.55% increase in return on net
worth and 48.76% increase in earnings per share. The current ratio and book
value too were favourable.
141
12. Consumer Electronics
Only Blue Star Ltd went for buy-back. It reported a decline of
(-13.9%) in net profit ratio year after buy-back, but the return on net worth
ratio increased by 27.29%, earnings per share increased by 27.29% and book
value increased by 25.38%.
13. Heavy Electricals and Electrical Utilities
The companies in this industry exhibited a mixed performance. While the
performance of Siemens Ltd was good with an increase of 64.76% in net profit,
32.55% rise in return on net worth, 105.77% increase in earnings per share and
55.23% increase in book value, ECE Industries Ltd recorded a decline of
(-83.68%) in net profit margin, (-84.11%) in return on net worth and
(-83.59%) in earnings per share.
14. Engineering, Industrial Machinery and Allied Products
Except Hindalco Industries Ltd all the companies in this industry except
Hindalco Industries Ltd performed well after buy-back and their financial
results were positive. G Dandekar Machine Works Ltd and Mazda Ltd recorded
an increase of 193.94% and 216.36% respectively in earnings per share. The
current ratios were favourable. The earnings per share and book value were
also positive.
15. Auto Parts
Exide Industries Ltd performed well and recorded an increase of 87.26% in net
profit ratio, 98.87% rise in return on net worth, and 16.38% rise in earnings per
share. However, ANG Auto Ltd registered a decline of (-42.92%) in net profit,
and (-11.0%) in return on net worth. The current ratio in both the cases was
favourable.
16. Diamond Cutting and Precious Metal Jewellery
Goldiam International Ltd was the only company in this industry that went for
buy-back and it performed extra-ordinarily well after buy-back.
142
17. Diversified
Under this industry Kesoram Industries Ltd undertook two buy-back
programmes and recorded a rise of 8.09% in net profit ratio in the first
buy-back and decline of (-94.94%) in net profit ratio in other buy-back by the
company. However, the return on net worth ratio and earnings per share
declined in the first buy-back by (-34.72%) and (-28.80%) respectively after
the first buy-back and there was an increase in return on net worth (6.98%) and
earnings per share (19.58%) after the second buy-back .
18. Cement and Cement Products
This industry registered mixed results. While the percentage increase in the net
profit, return on net worth and earnings per share of OCL India Ltd and Rain
Commodities Ltd was more than 150%, the performance of Madras Cement
Ltd was not satisfactory after buy-back.
D -Electricity, Gas Steam, and Air Conditioning Supply
The percentage difference in the net profit ratios, return on net worth ratios of
Reliance Energy Ltd and Reliance Infra Ltd in the industry declined year after
buy-back, the current ratio after buy-back was 1.73 and there was an increase
in book value of the company of more than 23%.
F – Construction and Real Estate Activities
DLF Ltd in this industry did not perform well after the buy-back. The net profit
ratio, return on net worth ratio and earnings per share declined more than
(-40%) year after buy-back, but the current ratio after buy-back was positive.
H -Transportation and Storage and Shipping
The overall performance of this industry was satisfactory. The financial ratios
of Great Eastern Shipping Ltd after buy-back in both buy-back cases were
positive. There was a decline in net profit ratios of Great Offshore Ltd by
143
(-21.53%) and a marginal decrease of (-0.52%) in return on net worth ratio of
Gateway Distriparks Ltd.
J - Information and Communication
1. Computer Software Production
A mixed trend was noticed in this industry. Mastek Ltd in the first buy-back
and Ace Software Exports Ltd (in the second buy-back) registered a gain of
23.09% and 91.99% in net profit respectively after buy-back and a marginal
decline of less than (-10%) in net profit ratios was noticed in Ace Software Ltd,
(in the first buy-back), Mastek Ltd (in the second buy-back) and Patni
Computer System Ltd. However, except for Mastek Ltd (in the second
buy-back) all the companies in this industry registered a rise in earnings per
share after buy-back.
2. IT Consulting and Software
In this industry while the net profit ratio, the return on net worth, earnings per
share of GSS America Infotech Ltd declined by more than (-50%) these ratios
increased by more than 150% in case of Sasken Communications and
Technologies Ltd. The book value increased by 10% of both the companies.
3. Computer Hardware
The performance of the MRO Tek Ltd the only company who went for
buy-back in this industry was discouraging as there was a decline in net profit
margin ratio and return on net worth of (-72.25%) and (-69.73%) respectively.
4. Telecom Cables and Equipments
The financial ratios of companies in this industry were disappointing and the
net profit ratios, the return on net worth ratios and earnings per share of all the
three companies declined by more than (-35%).
144
K- Information and Communication and Broadcasting and Cable T V
T V Today Network Ltd the only company in this industry which went for
buy-back did not perform well after buy-back and the net profit ratio, return on
net worth and earnings per share ratios were negative.
L –Financial and Insurance Activities
In this industry the net profit ratios and return on net worth of two companies
were negative, but Indiabulls Financial Services Ltd recorded a rise of 5.59% in
net profit, 88.38% in return on net worth and 511.95% increase in earnings per
share and 143.15% rise in book value year after buy-back.
Industry-wise analysis reveals that manufacturing industries as packaged food,
food products beverages, sugar, textiles, plastics, personal products,
commodity chemicals, pharmaceuticals, iron and steel, consumer electronics,
engineering, industrial machinery and aluminum, diamond cutting,
transportation and storage and financial services and insurance performed well
after buy-back. However, the companies which did not perform well include
agriculture, forestry and fishing, exploration, industrial gases, paints and
varnishes, cement, construction and real estate, and auto industries,
information and communication software, hardware companies, telecom cables
and equipments, and broadcasting and cable T.V.
Though the performance of majority companies was positive and promising we
cannot generalize that buy-back results in an increase in operating efficiency.
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 as
business risks and external factors, like cyclical factors, competition,
government policies, global subprime crisis etc. Besides, there are companies
which brought in financial changes as double buy-back, issue of bonus shares,
rights issue, etc after buy-back which also affects the performance of the
companies. Share buyback is nothing more than a relatively minor kind of
financial engineering and cannot provide immunity to the company against the
fundamental economic forces.
145
Buy-back of shares and effect on shareholders’ wealth
Gain to the shareholders can be measured at two stages, i.e. gain to those who
have participated in buy-back and tendered shares in the buy-back process and
gain to those who have not participated and retained shares after buy-back. An
attempt is made to find whether the shareholders’ wealth increased or not due
to buy-back in both the cases.
5.3.1 Difference between Offer Price and Actual Price paid
Offer price of shares is the maximum price at which the company agrees to
buy-back its own shares from open market during buy-back process. But, it is
at the discretion of the company management to decide at what price, on which
days and in what quantity the company will repurchase its shares. The
companies are at liberty to end the buy-back programme or discontinue it
before the end date and even before the total aggregate amount are reached.
Nevertheless, according to Section 77A (9), such particulars are required to be
entered in the register of buy-back of securities within 7 days of the date of
completion of buy-back.
A comparison between offer price and actual price of share offered for
buy-back is exhibited in Table 12 which is as follows:
146
Table 12
Mean Share Prices before buy-back, Share Prices on Announcement Date, Offer Price and Actual Price paid
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
1 Selan Exploration Technologies Ltd. 13.26 14 20 10.99 42.86 -45.05 50.83
2 Great Eastern Shipping Ltd 34.84 35.02 42 34.91 19.93 -16.88 20.55
3 Raymonds Ltd 139.14 135.5 160 135 18.08 -15.63 14.99
4 Selan Exploration Technologies Ltd. 11.13 11.5 25 11.65 117.39 -53.40 124.62
5 Finolex Industries Ltd 19.11 21.15 40 27.73 89.13 -30.68 109.31
6 Jayshree Tea and Industries Ltd 60.08 58.8 75 51.2 27.55 -31.73 24.83
7 Siemens Ltd 197.03 204.8 250 197.49 22.07 -21.00 26.88
8 Winsome Yarns Ltd 6.29 6.8 10 7.01 47.06 -29.90 58.98
9 Great Eastern Shipping Ltd 29.2 28.35 42 28.27 48.15 -32.69 43.84
10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 40.5 60 40.7 48.15 -32.17 49.11
11 Britannia Industries Ltd 555.74 559.8 750 533.15 33.98 -28.91 34.96
12 OCL India Ltd 49.01 51.5 80 57 55.34 -28.75 63.23
147
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
13 Kesoram Industries Ltd 22.17 22.9 40 26.61 74.67 -33.48 80.42
14 Exide Industries Ltd 57.5 57.2 70 66.56 22.38 -4.91 21.74
15 Godrej Consumer Products Ltd 55.53 56.75 100 17.77 76.21 -82.23 80.08
16 Heritage Food (India) Ltd (16) 23.22 19.9 30 27.62 50.75 -7.93 29.20
17 G G Dandekar Machine Works 161.23 164 250 245.15 52.44 -1.94 55.06
18 Hindalco Industries Ltd 715.9 692.95 825 734.79 19.06 -10.93 15.24
19 Blue Star Ltd 55.02 56.85 75 65.4 31.93 -12.80 36.31
20 Selan Exploration Technologies Ltd. 10.47 10.85 25 10.72 130.41 -57.12 138.78
21 Winsome Yarns Ltd 6.39 6.95 10 8.25 43.88 -17.50 56.49
22 Finolex Industries Ltd 31.53 32.75 40 34.24 22.14 -14.40 26.86
23 Godrej Consumer Products Ltd 93.36 101.3 175 110.94 72.75 -36.61 87.45
24 Britannia Industries Ltd 523.16 539.05 650 529.13 20.58 -18.60 24.24
25 Venky’s (India) Ltd 46.38 46.55 65 50.61 39.63 -22.14 40.15
26 Solitaire Machines Tools Ltd 2.98 4 8 4.8418 100.00 -39.48 168.46
27 Bombay Dyeing And Manufacturing Co. Ltd 42.18 42.25 65 46.54 53.85 -28.40 54.10
148
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
28 Sun Pharmaceuticals Ltd 600.68 603.05 750 274.71 24.37 -63.37 24.86
29 Godrej Consumer Products Ltd 100.83 102.2 175 113.68 71.23 -35.04 73.56
30 Kesoram Industries Ltd 26.89 30.05 40 32.39 33.11 -19.03 48.75
31 ECE Industries Ltd 28.13 28 30 30 7.14 0.00 6.65
32 Ace Software Exports Ltd 8.09 8.2 10 9.47 21.95 -5.30 23.61
33 Fine- Line Circuits Ltd 3.83 4.1 6.5 5.66 58.54 -12.92 69.71
34 Selan Exploration Technologies Ltd. 8.95 9.45 25 15.98 164.55 -36.08 179.33
35 Mazda Ltd 8.92 8.5 10 8.91 17.65 -10.90 12.11
36 Godrej Consumer Products Ltd 142.68 143.05 200 161.41 39.81 -19.30 40.17
37 Godrej Consumer Products Ltd 176.42 182 200 197.92 9.89 -1.04 13.37
38 Mastek Ltd 245.25 201.85 320 273.35 58.53 -14.58 30.48
39 Avery India Ltd 35.57 40 35 35 -12.50 0.00 -1.60
40 Britannia Industries Ltd 589.98 601.15 650 636.81 8.13 -2.03 10.17
41 Reliance Industries Ltd 530.39 528.1 570 521.38 7.93 -8.53 7.47
42 DIL Ltd 200.89 223.6 250 246.87 11.81 -1.25 24.45
149
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
43 Godrej Consumer Products Ltd 391.88 309.4 400 332.82 29.28 -16.80 2.07
44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 713.05 800 795.9 12.19 -0.51 10.25
45 Indiabulls Financial Services Ltd 162.88 168.55 210 208 24.59 -0.95 28.93
46 Prime Securities Ltd 62.74 69.9 101 63.52 44.49 -37.11 60.98
47 SRF Ltd 199.94 214.35 250 197.2 16.63 -21.12 25.04
48 Natco Pharma Ltd 112.33 155.55 150 140.36 -3.57 -6.43 33.54
49 Revathi Equipments Ltd 662.68 659.85 700 673.04 6.08 -3.85 5.63
50 Gujarat Ambuja Exports Ltd 28.48 30.1 38 34.26 26.25 -9.84 33.43
51 Ace Software Exports Ltd 16.08 16.35 20 16.91 22.32 -15.45 24.38
52 MRO- Tek Ltd 46.59 49.05 55 46.99 12.13 -14.56 18.05
53 ICI India Ltd 502.62 516.85 575 524.323 11.25 -8.81 14.40
54 Hindustan Unilever Ltd 220.07 227.05 230 207 1.30 -10.00 4.51
55 Madras Cements Ltd 3685.86 3409.4 4200 3592 23.19 -14.48 13.95
56 Reliance Energy Ltd 1365.69 1270 1600 908.14 25.98 -43.24 17.16
57 Reliance Infra Ltd 526.55 550 700 509.54 27.27 -27.21 32.94
150
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
58 Goldiam International Ltd 57.33 57.45 75 39.88 30.55 -46.83 30.82
59 Great Offshore Ltd 665.78 666.15 750 564.26 12.59 -24.77 12.65
60 Mastek Ltd 371.48 382.2 750 391.55 96.23 -47.79 101.90
61 SRF Ltd 122.81 115.5 160 94.82 38.53 -40.74 30.28
62 Patni Computers Ltd 226.22 237.25 325 216.3 36.99 -33.45 43.67
63 Gateway Distriparks Ltd 90.92 86.75 110 81.18 26.80 -26.20 20.99
64 Gujarat Fluorochemicals Ltd 191.55 193.75 300 103.48 54.84 -65.51 56.62
65 Sasken Communications Technologies Ltd 139.47 139.1 260 106.8 86.92 -58.92 86.42
66 Rain Commodities Ltd 193.01 181.5 307 149.66 69.15 -51.25 59.06
67 Surana Telecom and Power Ltd 28.85 28.25 50 24.69 76.99 -50.62 73.31
68 Godrej Consumer Products Ltd 117.45 117.05 150 132.74 28.15 -11.51 27.71
69 Supreme Industries Ltd 106.2 101.15 125 110.86 23.58 -11.31 17.70
70 E.I.D.Parry (India) Ltd 141.27 165.1 160 141.18 -3.09 -11.76 13.26
71 ANG Auto Ltd 75.69 81.3 215 52.23 164.45 -75.71 184.05
72 DLF Ltd 311.37 301.65 600 184.19 98.91 -69.30 92.70
151
Sr.
No. Name of the Company
Mean
Share
Price
B.B.B
Price
on
A.D
Offer
price
O.P
Actual
Price
A.P
%Diff
(O.P-
A.D)/
A.Dx100
% Diff
(O.P-
A.P)/
O.Px100
%Diff
(O.P-
M.P)/
M.Px100
` ` ` `
73 GSS America Infotech Ltd 124.51 124.85 250 152.27 100.24 -39.09 100.79
74 Jindal Poly Films Ltd 147.58 142.9 350 270 144.93 -22.86 137.16
75 L K P Finance Ltd 59.37 60.9 90 77.65 47.78 -13.72 51.59
76 Mangalam Cement Ltd 48.66 51.25 75 72.03 46.34 -3.96 54.13
77 Monnet Ispat Ltd 128.2 136.75 300 141.25 119.38 -52.92 134.01
78 FDC Ltd 25.1 25.05 40 34.31 59.68 -14.23 59.36
79 T V Today Network Ltd 56.18 56.8 115 80.52 102.46 -29.98 104.70
80 Valiant Communications Ltd 22.31 23.8 32 23.62 34.45 -26.19 43.43
81 Avantel Ltd 43.06 41.2 50 49.05 21.36 -1.90 16.12
82 Godrej Industries Ltd 106.06 93.9 275 134.41 192.86 -51.12 159.29
Mean Share Price B.B.B = Mean share price 10 days before buy-back
A.D = Announcement Date
O.P = Offer Price
A.P = Actual Price paid
152
Table 12 highlights that there is a difference of more than 25% between offer
price and actual price paid by the companies. It is evident that in majority of
buy-backs the offer price was more than 25% of the mean share price 10 days
before the opening of the buy-back offer and in case of 12 companies
i.e.14.63% of companies, offer price was more than 100% of the mean share
price 10 days before buy-back. Thus the offer price seemed more attractive,
alluring the shareholders to tender their share during the process of buy-back.
However, a comparison between the maximum offer price and the actual price
paid for the share buy-back shows that the actual price paid was less than 50%
of maximum offer price in case of 12 companies, i.e. 14.84% companies and
was less than 25% of maximum offer price in case of 37 companies i.e. 45%
companies. Thus, it is evident that the shareholders due to lack of minimum
price stood to lose in the buy-back process.
5.3.2 Share Prices on announcement date, opening of the offer date,
closure of the offer date and one month after the closure of the offer date.
The wealth of the shareholders with respect to the buy-back event can also be
examined by comparing the share prices on announcement date (A.D), opening
of the offer date (O.D), closure of the offer date (C.D) and one month after the
closure. Table 13 shows the prices of shares on announcement date (A.D),
opening of the offer date (O.D), on closing of the offer date (C.D) and one
month after the closure.
153
Table 13
Prices of shares on Announcement, Opening of offer, Closure of offer and One month after closure date
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
1 Selan Exploration Technologies Ltd. 14 14.4 14.2 12 2.86 -1.39 -15.49 -14.29
2 Great Eastern Shipping Ltd 35.02 34.11 27.55 31.7 -2.60 -19.23 15.06 -9.48
3 Raymonds Ltd 135.5 141.5 106.4 103.8 4.43 -24.81 -2.44 -23.39
4 Selan Exploration Technologies Ltd. 11.5 11.65 10.3 8 1.30 -11.59 -22.33 -30.43
5 Finolex Industries Ltd 21.15 22.8 26 29.55 7.80 14.04 13.65 39.72
6 Jayshree Tea and Industries Ltd 58.8 59.1 43.75 41.5 0.51 -25.97 -5.14 -29.42
7 Siemens Ltd 204.8 202.3 311.3 320 -1.22 53.88 2.79 56.25
8 Winsome Yarns Ltd 6.8 6.95 6.75 6.35 2.21 -2.88 -5.93 -6.62
9 Great Eastern Shipping Ltd 28.35 29.9 30.4 28.7 5.47 1.67 -5.59 1.23
10 Bombay Dyeing And Manufacturing Co. Ltd 40.5 41.15 52.65 50.25 1.60 27.95 -4.56 24.07
11 Britannia Industries Ltd 559.8 560 566 581.5 0.04 1.07 2.74 3.88
12 OCL India Ltd 51.5 50.3 60 50.5 -2.33 19.28 -15.83 -1.94
13 Kesoram Industries Ltd 22.9 23.35 32.9 26.25 1.97 40.90 -20.21 14.63
154
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
14 Exide Industries Ltd 57.2 57.75 89.8 90.4 0.96 55.50 0.67 58.04
15 Godrej Consumer Products Ltd 56.75 57.7 75.95 89.15 1.67 31.63 17.38 57.09
16 Heritage Food (India) Ltd (16) 19.9 22.75 27.5 28.55 14.32 20.88 3.82 43.47
17 G G Dandekar Machine Works 164 200 260 171 21.95 30.00 -34.23 4.27
18 Hindalco Industries Ltd 692.95 729.6 589.25 591.05 5.29 -19.24 0.31 -14.71
19 Blue Star Ltd 56.85 59.15 75 80.4 4.05 26.80 7.20 41.42
20 Selan Exploration Technologies Ltd. 10.85 11.6 8.9 8.4 6.91 -23.28 -5.62 -22.58
21 Winsome Yarns Ltd 6.95 6.25 8.65 7 -10.07 38.40 -19.08 0.72
22 Finolex Industries Ltd 32.75 32.5 46.9 54.7 -0.76 44.31 16.63 67.02
23 Godrej Consumer Products Ltd 101.3 100.2 110.45 105.5 -1.09 10.23 -4.48 4.15
24 Britannia Industries Ltd 539.05 542.5 527.8 535.15 0.64 -2.71 1.39 -0.72
25 Venky’s (India) Ltd 46.55 46.3 53 56.65 -0.54 14.47 6.89 21.70
26 Solitaire Machines Tools Ltd 4 4.45 3.1 3.5 11.25 -30.34 12.90 -12.50
27 Bombay Dyeing And Manufacturing Co. Ltd 42.25 43.55 64.9 78.65 3.08 49.02 21.19 86.15
28 Sun Pharmaceuticals Ltd 603.05 599.55 510.45 578.2 -0.58 -14.86 13.27 -4.12
155
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
29 Godrej Consumer Products Ltd 102.2 101.15 142.45 145.6 -1.03 40.83 2.21 42.47
30 Kesoram Industries Ltd 30.05 25.9 47.05 47.7 -13.81 81.66 1.38 58.74
31 ECE Industries Ltd 28 28.1 46.1 55.3 0.36 64.06 19.96 97.50
32 Ace Software Exports Ltd 8.2 8.4 10.07 10.45 2.44 19.88 3.77 27.44
33 Fine- Line Circuits Ltd 4.1 4.25 4.6 3.25 3.66 8.24 -29.35 -20.73
34 Selan Exploration Technologies Ltd. 9.45 10.05 20.05 14.5 6.35 99.50 -27.68 53.44
35 Mazda Ltd 8.5 9.4 9.25 12.4 10.59 -1.60 34.05 45.88
36 Godrej Consumer Products Ltd 143.05 142.7 163.65 186.65 -0.24 14.68 14.05 30.48
37 Godrej Consumer Products Ltd 182 195.5 207.15 245 7.42 5.96 18.27 34.62
38 Mastek Ltd 201.85 269 348.4 376.35 33.27 29.52 8.02 86.45
39 Avery India Ltd 40 35.1 45.25 39 -12.25 28.92 -13.81 -2.50
40 Britannia Industries Ltd 601.15 609.9 619.2 671.85 1.46 1.52 8.50 11.76
41 Reliance Industries Ltd 528.1 533.5 725.75 730.6 1.02 36.04 0.67 38.35
42 DIL Ltd 223.6 206 315.2 382.75 -7.87 53.01 21.43 71.18
43 Godrej Consumer Products Ltd 309.4 328.75 349.35 425.8 6.25 6.27 21.88 37.62
156
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
44 Glaxo Smithkline Pharmaceuticals Ltd 713.05 742.4 1107.15 1193.65 4.12 49.13 7.81 67.40
45 Indiabulls Financial Services Ltd 168.55 160.3 187.9 207.55 -4.89 17.22 10.46 23.14
46 Prime Securities Ltd 69.9 61.4 56.35 59.55 -12.16 -8.22 5.68 -14.81
47 SRF Ltd 214.35 199.6 232.75 239.15 -6.88 16.61 2.75 11.57
48 Natco Pharma Ltd 155.55 147.4 119.75 109.3 -5.24 -18.76 -8.73 -29.73
49 Revathi Equipments Ltd 659.85 680.6 801.15 806.1 3.14 17.71 0.62 22.16
50 Gujarat Ambuja Exports Ltd 30.1 30.1 83.45 63.25 0.00 177.24 -24.21 110.13
51 Ace Software Exports Ltd 16.35 16.45 18.4 14.9 0.61 11.85 -19.02 -8.87
52 MRO- Tek Ltd 49.05 46.2 43.4 54.1 -5.81 -6.06 24.65 10.30
53 ICI India Ltd 516.85 525.85 525 500.3 1.74 -0.16 -4.70 -3.20
54 Hindustan Unilever Ltd 227.05 220.35 207.8 231.8 -2.95 -5.70 11.55 2.09
55 Madras Cements Ltd 3409.4 3639.55 3237.45 3100.35 6.75 -11.05 -4.23 -9.06
56 Reliance Energy Ltd 1270 1190.8 520.35 457.6 -6.24 -56.30 -12.06 -63.97
57 Reliance Infra Ltd 550 506.75 653.15 769.15 -7.86 28.89 17.76 39.85
58 Goldiam International Ltd 57.45 58.95 20.35 20.35 2.61 -65.48 0.00 -64.58
157
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
59 Great Offshore Ltd 666.15 674.7 483.05 483.05 1.28 -28.41 0.00 -27.49
60 Mastek Ltd 382.2 397.55 357.35 357.35 4.02 -10.11 0.00 -6.50
61 SRF Ltd 115.5 118.3 84.45 120.8 2.42 -28.61 43.04 4.59
62 Patni Computers Ltd 237.25 246.8 142.45 142.55 4.03 -42.28 0.07 -39.92
63 Gateway Distriparks Ltd 86.75 96.45 71.45 45.95 11.18 -25.92 -35.69 -47.03
64 Gujarat Fluorochemicals Ltd 193.75 199.75 68.65 83.7 3.10 -65.63 21.92 -56.80
65 Sasken Communications Technologies Ltd 139.1 130.45 69.75 52.05 -6.22 -46.53 -25.38 -62.58
66 Rain Commodities Ltd 181.5 201 86.6 95.45 10.74 -56.92 10.22 -47.41
67 Surana Telecom and Power Ltd 28.25 28.2 17.7 16.45 -0.18 -37.23 -7.06 -41.77
68 Godrej Consumer Products Ltd 117.05 125.3 125.4 126.65 7.05 0.08 1.00 8.20
69 Supreme Industries Ltd 101.15 112.2 113.3 98.75 10.92 0.98 -12.84 -2.37
70 E.I.D.Parry (India) Ltd 165.1 155.7 131.05 147.5 -5.69 -15.83 12.55 -10.66
71 ANG Auto Ltd 81.3 81.8 56.1 29.65 0.62 -31.42 -47.15 -63.53
72 DLF Ltd 301.65 291.3 233.75 416.15 -3.43 -19.76 78.03 37.96
73 GSS America Infotech Ltd 124.85 125.15 177.35 249.3 0.24 41.71 40.57 99.68
158
A.D O.D C.D
One
Month
Later Sr.
No. Name of Companies
`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀
%
Diff.
(OD-
AD)
%
Diff.
(CD-
OD)
%Diff.
(1Month
Later-
CD)
%Diff.
(1Month
Later-
AD)
74 Jindal Poly Films Ltd 142.9 150.55 256.15 310.6 5.35 70.14 21.26 117.35
75 L K P Finance Ltd 60.9 56.25 83.7 90 -7.64 48.80 7.53 47.78
76 Mangalam Cement Ltd 51.25 51.45 142.2 130.45 0.39 176.38 -8.26 154.54
77 Monnet Ispat Ltd 136.75 124.55 254.5 234 -8.92 104.34 -8.06 71.12
78 FDC Ltd 25.05 26.7 42.65 48.15 6.59 59.74 12.90 92.22
79 T V Today Network Ltd 56.8 72.8 89.75 97.65 28.17 23.28 8.80 71.92
80 Valiant Communications Ltd 23.8 21 27.15 27.2 -11.76 29.29 0.18 14.29
81 Avantel Ltd 41.2 47.3 48.75 57.95 14.81 3.07 18.87 40.66
82 Godrej Industries Ltd 93.9 132.75 139.15 163.7 41.37 4.82 17.64 74.33
A.D=Announcement Date % Diff (O.D-A.D) = [(O.D-A.D)/A.D] x 100
O.D=Opening of offer Date %Diff (C.D-O.D)= [(C.D-O.D)/O.D] x 100
C.D=Closure of offer Date % Diff. (1 Month Later –C.D) = [(1 Month Later-C.D)/C.D] x100
Later=One month Later Date % Diff.( 1 Month Later –A.D) = [(1 Month Later-A.D)/A.D] x100
159
An overall mixed effect of buy-back of shares on share prices is noticed as is
evident in the Table 13.
A. As observed in the Table 13, the announcement of buy-back resulted in an
increase in share prices in case of 53 companies i.e. 64.63%, from the date of
announcement date to the date of opening of the offer, whereas it declined in
case of 29 companies i.e.35.37% after announcement. Except for three
companies Mastek Ltd, TV Today Network Ltd and Godrej Industries Ltd the
share prices increased more than 25%; The announcement effect ranged
between (-25%) to (+25%).
B. The declining trend in share prices further extended during the buy-back
period i.e. opening of the offer and closing of the offer dates. In as many as 32
companies (39.02%) the prices on closing date declined as compared to share
prices on the offer date and the decline was less than 25% in case of 14
companies as compared to the prices on the offer date. However, in case of
other 22 companies, prices reacted positively ranging between 0 to 25% and in
case of 3 companies it increased more than 100%. i.e. Gujarat Ambuja Exports
Ltd (177.24%), Mangalam Cement Ltd (176.38%) and Monnet Ispat Ltd
(104.34%)
C. The prices of shares one month post closure date exhibited a stable pattern.
It seemed that prices of companies which increased or declined more than 50%
during the buy-back phase, i.e. between the offer date and closing of the offer
date, moderately tended to range between (-25%) to (+25%) after buy-back
except in case of 6 companies- GG Dandekar Machines Ltd, Fine-Line Circuits
Ltd, Selan Exploration Techonologies Ltd Gateway Distriparks Ltd, Sasken
Communication Technologies Ltd and ANG Auto Ltd which declined more
than (-25%) in a short period of one month. In case of 4 companies the prices
increased more than (25%) i.e. Mazda Ltd (34.05%), SRF Ltd (43.04%) during
second buy-back, DLF Ltd (78.03%) and GSS America Infotech Ltd (40.57%).
D. Difference between the prices post closure of the offer and announcement
day reflected the same pattern. There were 19 companies which recorded a
difference between 0 to (-25%) and 16 companies which recorded an increase
160
between (0 to +25%). However, there were 3 cases- Gujarat Ambuja Exports
Ltd, Jindal Polyfilms Ltd and Mangalam Cement Ltd, where the increase in
share price one month post closure date as compared to announcement date was
more than 100% which benefited the shareholders who did not participate in
the buy-back offer. At the same time, the decline in case of 5 companies was
more than 50% i.e. Reliance Energy Ltd (-63.97%), Goldiam International Ltd
(-64%), Gujarat Flurochemicals Ltd (-56.80%), Sasken Communication
Techonologies Ltd (-62.58%), and ANG Auto Ltd (-63.53%), resulting in great
loss to shareholders who retained their shares.
Thus, on an average, shareholders of 35.36% of companies offering
buy-back suffered a setback after the completion of buy-back as compared to
64.63% of companies which gained after buy-back. All the same, it is difficult
to forecast whether there would be a rise or fall in the share prices after
buy-back.
5.3.3 Analysis of Mean Share Price and Earnings Per Share
The ultimate gain or loss to the shareholders can also be studied by analyzing
the difference in mean share prices after buy-back and before buy-back
together with a change in earnings per share before and after buy-back as
shown in Table 14.
Table 14
Difference in Mean Share Price and EPS
Difference in Mean share price and EPS No. of Cos. %
Both Positive 42 51.22
Both Negative 10 12.20
Prices Positive and EPS negative 13 15.85
Prices Negative and EPS Positive 17 20.73
Total 82 100
Thus, it is evident from the above Table 14 that among the shareholders who
did not tender their shares in the buy-back process, the shareholders of 42
161
companies (51.22%) stood to gain as the mean share prices after buy-back were
positive and the earnings per share a year after buy-back was also positive, but
the shareholders of 10 companies (12.20%) suffered loss as the mean share
prices after buy-back and even the earnings per share a year after buy-back
declined. The shareholders of 13 companies gained in the short run following
the buy-back in terms of share prices but there was a fall in the earnings per
share after one year. The shareholders of 17 companies did not gain in the short
run but measured in terms of earnings post one year the results were positive.
Nevertheless, only buy-back cannot be the sole factor to consider the effect on
EPS. Much depends on many other uncontrollable factors and the shareholders
may or may not have retained the shares of the companies in the long run.