Buyback of Shares
Buyback of shares
Success fee – 1% of Value of the Acquiring price
Duration – 3 to 6 months
Commitment Advance – Rs 200000 or 2000 USD
Mandate – Stamp paper agreement confirming the success fee
Buyback of shares refers to the repurchasing of market shares by the company that is issued to them. It usually happens when the issuing company’s existing shareholders are paid more or equal to the market price of the shares to get back the portion of its own that was previously divided among public and private investors.
Who gets benefited?
- Existing companies that have cash surpluses and those do not want to invest in its assets and would rather want to bet on themselves.
- The shareholders, as the buyback share price is usually more than the market price of the share.
- The undervalued company trying to get the fair value for its outstanding shares.
How to book this and what is the process?
Book your appointment to discuss your requirements and reasons for the buyback. We will gather your business/financial analysis report, We will also explain the plan of action and approach. All the legal steps will be followed.
Benefits of buyback of shares
- Companies that are below their average industry profitability enjoy better share price appreciation after purchasing shares than companies with profitability above their industry average.
- Companies whose sales growth was below their industry average had a higher share price rise after the repurchase of shares than those whose sales growth was above their industry average.
- Rentable and development businesses that repurchase shares are a direct indicator to investors of the company’s strengths.
- Repurchasing businesses with lower debt ratios but sales growth rates above their average industry report significantly higher share price growth following repurchase than firms with above-average debt ratios but sales growth below their industry average.
- By reducing the number of equity shareholders, the company can get more authority over the company i.e. higher ownership.
What do we do?
A company might buy back shares if it believes the market has discounted its shares too steeply, to invest in itself, or to improve its financial ratios. Buy-back of shares or securities results in lower capital and after buy-back of shares, the companies will have the advantage of servicing a reduced capital base with a higher dividend yield. We have to work on a different plan on the buyback of shares. It involves a big process, starting from regulation. We will explain it to you after we understand the company in detail, once we get the mandate.