Buyback of Shares by MNCs in India
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : FINC018
Case Length : 12 Pages
Period : 1997 - 2002
Pub. Date : 2002
Teaching Note : Available
Organization : SEBI
Industry : Financial Services
Countries : India
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FINC018) click on the button below, and select the case from the list of available cases:
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
Buy or Not to Buyback?
The dilemma that faced small investors in India was whether the buyback option, along with the SEBI guidelines, actually protected their interests and offered them an exit option at a fair price or was it a tool that provided them with no options allowing large MNCs to gain complete control of their subsidiaries.
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Investors felt that the regulations framed by SEBI did not have provisions for preventing good stocks from delisting. Moreover, the buyback price, which was determined using the parameters specified in the SEBI Takeover Code, did not consider the future potential of the stock (Refer Exhibit III for details of pricing parameters of open offers).
They felt that SEBI should have looked at various financial parameters such as future cash flows, value of brands and the value of fixed assets to determine a pricing formula for open offers which ensured that investors who had been holding the stock for several years received a fair price for their investment...
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Exhibits
Exhibit I: The Buyback Process
Exhibit II: Concept Note - Methods of Buyback
Exhibit III: Pricing Parameters for an Open Offer to Buyback Shares
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