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BUY-BACK OF SHARES

BUY-BACK OF SHARES. BINANI CEMENT. Keynote corporate services Ltd on behalf Binani Cement Ltd has issued this Public Announcement to the Equity Shareholder owners of the equity shares of target co. is in compliance with SEBI Regulation ,1999 & subsequent amendments thereof.

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BUY-BACK OF SHARES

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  1. BUY-BACK OF SHARES

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

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

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

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

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

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

  8. SOURCES A Company can purchases its own shares out of its following sources : • Free Reserves • Securities Premium Account • The proceeds of any shares or other specified securities provided that no buyback of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other sspecified securities .

  9. CONDITIONS • Shares for buyback must be fully paid up • Buy-back must be authorized by articles of association of the company • Special Resolution • Limit on buyback of shares • Debt-Equity Ratio • To comply with regulation made by SEBI • Time limit for buyback • Declaration of insolvency • Restriction on further issue of same kind of shares

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

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

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

  13. OBJECTIVES OF BUY BACK • To increase promoters holding • Increasing earning per share • Support share value • To thwart takeover bid • To pay surplus cash not required by business

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

  15. ISSUE OF FURTHER SHARES AFTER BUY BACK Every buy back shall be completed within twelve months from the date of passing the special resolution or board resolution as the case may be .

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

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