Buyback of Shares by MNCs in India

Analysts felt that the buyback option may be misused by MNCs to increase their equity stakes in their Indian ventures, escape public scrutiny and accountability and prevent them from the Indian regulatory environment. Moreover, the option to convert their Indian ventures into wholly owned subsidiaries and delist their shares from the stock markets provided MNCs with complete control over their Indian ventures, allowed them to repatriate profits and make more independent investment decisions.

A section of investors felt that government regulations must have provided them with a choice. However, minority shareholders claimed that they had no option and were forced to sell their shares once MNCs bought back shares from the majority shareholders. For example, because Life Insurance Corporation (LIC) and the General Insurance Corporation (GIC), who together held a 21% stake in Philips, surrendered their shares when Philips made its first buyback offer, the minority shareholders were forced to surrender the remaining shares when Philips made a second offer in November 2001 (Refer Table II).