Buy back of shares

1. BUY-BACKBUY-BACK
OFOF
SHARESSHARES

2. BINANI CEMENTBINANI CEMENT
Keynote corporate services Ltd on behalfKeynote corporate services Ltd on behalf
Binani Cement Ltd has issued this PublicBinani Cement Ltd has issued this Public
Announcement to the Equity ShareholderAnnouncement to the Equity Shareholder
owners of the equity shares of target co.owners of the equity shares of target co.
is in compliance with SEBI Regulation ,is in compliance with SEBI Regulation ,
1999 & subsequent amendments thereof.1999 & subsequent amendments thereof.
closure of the offer –August 10,2010.closure of the offer –August 10,2010.

3. HUL BOARD OKAYS SHAREHUL BOARD OKAYS SHARE
BUYBACKBUYBACK
 The board of Hindustan Unilever (HUL) hasThe board of Hindustan Unilever (HUL) has
approved the buyback of shares announced lastapproved the buyback of shares announced last
week at a maximum of Rs 280 apiece . Theweek at a maximum of Rs 280 apiece . The
company outgo would not exceed Rs 630 crore.company outgo would not exceed Rs 630 crore.
HUL shares closed at Rs 252.50HUL shares closed at Rs 252.50
on the Bombay Stock Exchange todayon the Bombay Stock Exchange today
.According to HUL consolidated balance sheet.According to HUL consolidated balance sheet
dated March 31 ,cash and bank balances stooddated March 31 ,cash and bank balances stood
at Rs 2102.38 crore ,while networth was at Rsat Rs 2102.38 crore ,while networth was at Rs
2668.93 crore .2668.93 crore .

4. BUY-BACK OF SHARESBUY-BACK OF SHARES
(a) Meaning of buy-back(a) Meaning of buy-back
(b) Advantages of buy-back(b) Advantages of buy-back
(c) disadvantages of buy-back(c) disadvantages of buy-back
(d) sources of buy-back(d) sources of buy-back
(e) conditions which are required in buy-(e) conditions which are required in buy-
backback
(f) Accountings entries(f) Accountings entries

5. Meaning of Buy-BackMeaning of Buy-Back
 The companies (Amendment) Act 1999 has introducedThe companies (Amendment) Act 1999 has introduced
Section 77a in the companies Act, 1956 permittingSection 77a in the companies Act, 1956 permitting
companies to buy-back their own shares and othercompanies to buy-back their own shares and other
securities. Prior to the introduction of this Section, thesecurities. Prior to the introduction of this Section, the
buy-back of shares in India was totally prohibited.buy-back of shares in India was totally prohibited.
Buyback of share means repurchase of its own share byBuyback of share means repurchase of its own share by
a company .A company having substantial casha company .A company having substantial cash
resources may like to buy its own share from the marketresources may like to buy its own share from the market
when the prevailing market price of its share is muchwhen the prevailing market price of its share is much
lower than its book value or what the company perceiveslower than its book value or what the company perceives
to be its true value .This is called buy-back of shares.to be its true value .This is called buy-back of shares.

6. Advantages Of Buy-Back OfAdvantages Of Buy-Back Of
SharesShares
 Companies having large amount of freeCompanies having large amount of free
reserves are free to use funds to acquire sharesreserves are free to use funds to acquire shares
and other specified securities under the buy-and other specified securities under the buy-
back process.back process.
 Buy-back of shares is helpful to a company toBuy-back of shares is helpful to a company to
reduce its share capital which is bloatedreduce its share capital which is bloated
unnecessarily for the time being.unnecessarily for the time being.
 Buy-back of shares results in lower capitalBuy-back of shares results in lower capital
base , enhances post-buyback earning perbase , enhances post-buyback earning per
share and appreciates the price-earning ratio .share and appreciates the price-earning ratio .

7. Disadvantages Of Buy-back OfDisadvantages Of Buy-back Of
SharesShares
 The buybacks imply under valuation ofThe buybacks imply under valuation of
companies stock .the companies plough backcompanies stock .the companies plough back
some of the outstanding shares thereby creatingsome of the outstanding shares thereby creating
a shortage of shares in the market .a shortage of shares in the market .
 Companies go for announcing buyback whenCompanies go for announcing buyback when
they can’t find anything better to do with theirthey can’t find anything better to do with their
cash .cash .
 Well timed buyback of share is a clever way forWell timed buyback of share is a clever way for
managers to invest cheaply in a company theymanagers to invest cheaply in a company they
know rather than expensively in a company theyknow rather than expensively in a company they
don’t know .don’t know .

8. SOURCESSOURCES
A Company can purchases its own shares out ofA Company can purchases its own shares out of
its following sources :its following sources :
(a)(a) Free ReservesFree Reserves
(b)(b) Securities Premium AccountSecurities Premium Account
(c)(c) The proceeds of any shares or other specifiedThe proceeds of any shares or other specified
securitiessecurities
provided that no buyback of any kind ofprovided that no buyback of any kind of
shares or other specified securities shall beshares or other specified securities shall be
made out of the proceeds of an earlier issue ofmade out of the proceeds of an earlier issue of
the same kind of shares or same kind of otherthe same kind of shares or same kind of other
sspecified securities .sspecified securities .

9. CONDITIONSCONDITIONS
 Shares for buyback must be fully paid upShares for buyback must be fully paid up
 Buy-back must be authorized by articles ofBuy-back must be authorized by articles of
association of the companyassociation of the company
 Special ResolutionSpecial Resolution
 Limit on buyback of sharesLimit on buyback of shares
 Debt-Equity RatioDebt-Equity Ratio
 To comply with regulation made by SEBITo comply with regulation made by SEBI
 Time limit for buybackTime limit for buyback
 Declaration of insolvencyDeclaration of insolvency
 Restriction on further issue of same kind ofRestriction on further issue of same kind of
sharesshares

10. ACCOUNTING ENTRIESACCOUNTING ENTRIES
1)FOR SALE OF INVESTMENT :1)FOR SALE OF INVESTMENT :
Bank A/c Dr.Bank A/c Dr.
Profit & Loss A/c Dr.Profit & Loss A/c Dr.
To investment A/cTo investment A/c
To capital reserve A/cTo capital reserve A/c
2) FOR ISSUE OF ANY SHARES OR OTHER SPECIFIED2) FOR ISSUE OF ANY SHARES OR OTHER SPECIFIED
SECURITIES :SECURITIES :
Bank A/c Dr.Bank A/c Dr.
To pref. share capital A/cTo pref. share capital A/c
To securities premium A/cTo securities premium A/c
3) FOR CANCELLATION OF SHARES BOUGHT BACK3) FOR CANCELLATION OF SHARES BOUGHT BACK
Equity share capital A/c Dr.Equity share capital A/c Dr.
Free Reserves A/c Dr.Free Reserves A/c Dr.
To Shareholders A/cTo Shareholders A/c

11. Further Accounting entriesFurther Accounting entries
4)FOR MAKING PAYMENTS TO EQUITY SHAREHOLDERS FOR4)FOR MAKING PAYMENTS TO EQUITY SHAREHOLDERS FOR
SHARE BOUGHT BACK:SHARE BOUGHT BACK:
Equity shareholders A/c Dr.Equity shareholders A/c Dr.
To Bank A/cTo Bank A/c
5) FOR TRANSFER OF FREE RESERVES TO CAPITAL5) FOR TRANSFER OF FREE RESERVES TO CAPITAL
REDEMPTION RESERVE A/C TO MEET THE REQUIREMENT OFREDEMPTION RESERVE A/C TO MEET THE REQUIREMENT OF
LAW FOR BUYBACK OF SHARESLAW FOR BUYBACK OF SHARES
Free Reserves A/c Dr.Free Reserves A/c Dr.
To Capital Redemption Reserve A/cTo Capital Redemption Reserve A/c

12. BUYBACK OF SHARES UNDER THEBUYBACK OF SHARES UNDER THE
COMPANIES ACT,1956-AN INSIGHTCOMPANIES ACT,1956-AN INSIGHT
 The provision regulating buy back ofThe provision regulating buy back of
shares are contained in Section 77A,shares are contained in Section 77A,
77AA and 77B of the Companies77AA and 77B of the Companies
Act,1956. These were inserted by theAct,1956. These were inserted by the
Companies ( Amendment ) Act ,1999Companies ( Amendment ) Act ,1999
.The Securities.The Securities
and Exchange Board of India (SEBI)and Exchange Board of India (SEBI)
framed the SEBI (Buy Back of Securities).framed the SEBI (Buy Back of Securities).

13. OBJECTIVES OF BUY BACKOBJECTIVES OF BUY BACK
 To increase promoters holdingTo increase promoters holding
 Increasing earning per shareIncreasing earning per share
 Support share valueSupport share value
 To thwart takeover bidTo thwart takeover bid
 To pay surplus cash not required byTo pay surplus cash not required by
businessbusiness

14. REGISTER OF SECURITIESREGISTER OF SECURITIES
BOUGHT BACKBOUGHT BACK
 The consideration paid for the securities ,The consideration paid for the securities ,
 The date of cancellation of securities ,The date of cancellation of securities ,
 The date of extinguishing & physicallyThe date of extinguishing & physically
destroying of securities &destroying of securities &
 Such other particulars as may beSuch other particulars as may be
prescribed .prescribed .

15. ISSUE OF FURTHERISSUE OF FURTHER
SHARES AFTER BUYSHARES AFTER BUY
BACKBACK
Every buy back shall beEvery buy back shall be
completed within twelve monthscompleted within twelve months
from the date of passing thefrom the date of passing the
special resolution or boardspecial resolution or board
resolution as the case may be .resolution as the case may be .

16. BUY BACK OFFER BY MNCSBUY BACK OFFER BY MNCS
In the financial year 2001-2002, twenty MNCs madeIn the financial year 2001-2002, twenty MNCs made
buyback offers .Some of the well-known MNCS whichbuyback offers .Some of the well-known MNCS which
offered to buy back their shares were Philips Indiaoffered to buy back their shares were Philips India
Limited (Philips), Cadbury India Limited (Cadbury)Limited (Philips), Cadbury India Limited (Cadbury)
,Britannia Industries Ltd (Britannia) ,Carrier Aircon,Britannia Industries Ltd (Britannia) ,Carrier Aircon
(Carrier) and otis Elevators (otis) . All these companies(Carrier) and otis Elevators (otis) . All these companies
made open offers for the non-promoters shareholding inmade open offers for the non-promoters shareholding in
their Indian subsidiaries . To buy back shares ,Cadburytheir Indian subsidiaries . To buy back shares ,Cadbury
paid Rs 9 billon, philips Rs 2 billion ,and carrier , otis andpaid Rs 9 billon, philips Rs 2 billion ,and carrier , otis and
Reckitt Benkiser all paid over Rs 1 billion .Reckitt Benkiser all paid over Rs 1 billion .