Sebi Revised Guidelines on Share Buyback

Topics: Stock market, Stock, Share repurchase Pages: 18 (5244 words) Published: August 18, 2013
Table 1: Comparison of Share Buy Back Regulations in ten largest markets

2013
Analysis of Share Buy-Back Regulation Amendment by SEBI

BFMS TERM PAPER
Group 14 Gaurav Kumar - 1211095

Tamoghna Sadhu - 1211231 Phalguni
8/6/2013

- 1211363
0

Table of Contents

Introduction ..................................................................................................................................... 2 Analysis of Effect on Share Prices after Buy Back Announcement in India .................................. 2 Background of Buyback Regulations in India ................................................................................ 3 Modes of Share Repurchase............................................................................................................ 4 Reasons for repurchase ................................................................................................................... 4 Share Repurchasing Regulations in Other Countries...................................................................... 4 SEBI Amendment 2013 .................................................................................................................. 9 o o o o o o o Reduction in the period allowed for repurchase............................................................... 9 Restrictions on minimum number of shares bought back ................................................ 9 Raising further Capital ..................................................................................................... 9 Creation of Escrow Account ............................................................................................ 9 Window for Odd Lots ...................................................................................................... 9 Future Repurchase ............................................................................................................ 9 Restriction on Trading by promoters ............................................................................... 9

Justification for the Amendment ............................................................................................... 10 Advantages of Amendment for Investors ..................................................................................... 12 Disadvantages of Amendment for Investors ................................................................................. 13 Recent Buy Backs ......................................................................................................................... 14 Recommendations ......................................................................................................................... 15 Conclusion .................................................................................................................................... 16 References ..................................................................................................................................... 17

1 BFMS Term Paper – Recent Amendments in Share Buyback regulations by SEBI

Introduction
SEBI recently made stringent amendments in the buy-back regulations as many companies did not actually go for a buy-back after making share buy-back announcement. Companies try to mislead the market by announcing buy-back in order to push up their stock price. This term paper is an attempt to understand the need of such amendment by studying the effect of buy-back announcement on the company’s share price in brief and checking how many companies actually bought back their shares after buy back announcement. The finer points of this amendment are analyzed next. Buy-back is the most tax efficient way of returning the money to shareholders and strict rules may also lead to adaption of other inefficient ways of transferring capital to shareholders. Hence, in the following pages the advantages and disadvantages to the investors from this amendment are discussed. Finally, based...
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