The case study, Vardhman Textiles Ltd.’s Buyback of Shares discusses the share buyback offer issued by VTL, one of the leading textile companies in India. The management of VTL believed that the company was doing well on the basis of various financial parameters, but its share price did not reflect the correct value of the company. Also, VTL had sold its stake in one of its joint ventures and got cash of Rs. 4.13 billion. The growing cash balance and reserves and low debt to equity ratio motivated the management of VTL to go in for a share buyback in place of a regular dividend. The case provides information to understand the complete process of share buyback and to analyze whether the decision taken by VTL’s management was the right one or not.
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Issues
The case is structured to achieve the following teaching objectives:
To discuss various methods of distribution of excess cash to the shareholder.
To discuss the process of share buyback.
To identify various reasons to accept or reject any buyback offer.
To explore the various motives behind a share buyback.
To understand the various methods of share buyback.
Share Buyback; Dividend; Textile industry; Cash and bank balance; Wealth Distribution; Capital Structure; Dividend Distribution Tax; Buyback through Tender Offer; Buyback from Open Market
