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Financial Management Assignment 2014-15
Buyback of Shares

Group 10
Sushant Lohani (F-364)
Vijay Gupta (F-358)
Smarak Panda( F-351)
Ashok Lamba (F-314)
Nidhi Sain (F-332)

Q.What is buyback of shares and what are the various routes of buyback? Elaborate the routes with real life examples of companies buying back shares.
Are there any financial implications of buyback? If yes, then elaborate.

Advantages of Buy Back: 1. It is an alternative mode of reduction in capital without requiring approval of the Court/CLB(NCLT), 2. to improve the earnings per share; 3. to improve return on capital, return on net worth and to enhance the long-term shareholders value; 4. to provide an additional exit route to shareholders when shares are undervalued or thinly traded; 5. to enhance consolidation of stake in the company; 6. to prevent unwelcome takeover bids; 7. to return surplus cash to shareholders; 8. to achieve optimum capital structure; 9. to support share price during periods of sluggish market condition; 10. to serve the equity more efficiently.

Cash Dividends vs. Repurchasing Stock * Reasons for preferring repurchasing stock over paying a cash dividend: * Potential tax advantages * Signaling * Managerial flexibility * Offset dilution from executive stock options * Increase financial leverage

Reasons that have been brought forward that apply to share repurchases include: 1. Potential tax savings: in jurisdictions that tax shareholder dividends at higher rates than capital gains, share repurchases have a tax advantage over cash dividends 2. Share price support and signal that the company considers its shares as good investment – some analysts believe that repurchase could mean that the company is buying stocks back because it has no new

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