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    Acquisition of Shares Through Buyback: Presented To: Prof. Rajan

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    Hindustan Unilever Limited announced a share buyback offer to purchase up to 2.25 crore shares at Rs. 280 per share, utilizing up to Rs. 630 crore of its cash reserves. The objectives of the buyback were to effectively use surplus cash and reduce the number of outstanding shares, thereby improving financial ratios like earnings per share. Key financial ratios like return on assets, return on equity and earnings per share were expected to improve following the reduction in the number of outstanding shares as a result of the buyback. The company's share price rose following the announcement of the buyback offer.

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    Acquisition of Shares Through Buyback: Presented To: Prof. Rajan

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    Book worm
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    Hindustan Unilever Limited announced a share buyback offer to purchase up to 2.25 crore shares at Rs. 280 per share, utilizing up to Rs. 630 crore of its cash reserves. The objectives of the buyback were to effectively use surplus cash and reduce the number of outstanding shares, thereby improving financial ratios like earnings per share. Key financial ratios like return on assets, return on equity and earnings per share were expected to improve following the reduction in the number of outstanding shares as a result of the buyback. The company's share price rose following the announcement of the buyback offer.

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    Acquisition through buy back

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    Buyback (1)

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    Hindustan Unilever Limited announced a share buyback offer to purchase up to 2.25 crore shares at Rs. 280 per share, utilizing up to Rs. 630 crore of its cash reserves. The objectives of the buyback were to effectively use surplus cash and reduce the number of outstanding shares, thereby improving financial ratios like earnings per share. Key financial ratios like return on assets, return on equity and earnings per share were expected to improve following the reduction in the number of outstanding shares as a result of the buyback. The company's share price rose following the announcement of the buyback offer.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    41 views44 pages

    Acquisition of Shares Through Buyback: Presented To: Prof. Rajan

    Uploaded by

    Book worm
    Hindustan Unilever Limited announced a share buyback offer to purchase up to 2.25 crore shares at Rs. 280 per share, utilizing up to Rs. 630 crore of its cash reserves. The objectives of the buyback were to effectively use surplus cash and reduce the number of outstanding shares, thereby improving financial ratios like earnings per share. Key financial ratios like return on assets, return on equity and earnings per share were expected to improve following the reduction in the number of outstanding shares as a result of the buyback. The company's share price rose following the announcement of the buyback offer.

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    of 44

    ACQUISITION OF

    SHARES
    THROUGH
    BUYBACK
    PRESENTED TO: PROF. RAJAN
    AGENDA
    WHAT IS BUY
    BACK?
    Cancellation of share capital
    OBJECTIVES OF
    Unused Cash
    BUYBACK
    EXAMPLE
    BALANCE SHEET OF A COMPANY BEFORE
    BUYBACK:
    Liabilities Amt. Assets Amt.
    Equity 1,00,000 Fixed Assets 6,00,000
    Reserves 1,00,000 Current 3,00,000
    Assets
    Long term 2,00,000 Cash 1,00,000
    debt
    Bank Loan 2,00,000
    Current 4,00,000
    Liabilities
    Net Profit after tax (NPAT)=
    TOTAL Rs. 10,00,000
    10,00,000 TOTAL 10,00,00
    If the company buys back 50,000 shares through0cash, cash as w
    as the outstanding equity will decrease by Rs. 50,000.
    CHANGES IN KEY RATIOS
    Before Buyback After Buyback
    ROE= Net Profit After tax
    Shareholders equity
    = 10,00,000 = 10
    ROE= 10,00,000 = 20
    1,00,000
    50,000
    ROA= Net Profit After tax
    Total Assets
    ROA= 10,00,000 = 1.05
    = 10,00,000 = 1
    9,50,000
    10,00,000
    EPS= NPAT- Preference
    dividend EPS = 10,00,000 = 20
    No. of equity shares 50,000

    = 10,00,000 = 10
    1,00,000
    THE PROVISIONS REGULATING
    BUYBACK OF SHARES
    Section 77A, 77AA and 77B of the Companies Act,1956. These
    PROVISIONS
    UNDER
    COMPANIES ACT,
    1956
    SOURCES OF BUY-BACK
    SEC 77A (I)
    CONDITIONS FOR BUYBACK
    SEC 77A(2)
    a
    NOTICE OF THE MEETING
    SEC 77A(3)
    BUY BACK PERIOD SEC 77
    A(4)
    Every Buy Back should be complete
    MODES OF BUYBACK SEC
    77A(5)
    DECLARATION OF SOLVENCY
    SEC 77A(6)
    Declaration
    Registrar
    of of
    solvency
    company
    to be filed with the:
    DESTRUCTION OF THE
    SECURITIES SEC 77A(7)
    The company shall extinguish and physi
    FURTHER ISSUE OF SHARES
    SEC 77A(8)
    On completion
    a. Bonus shares;
    of buy-back
    or of shares / securities, the company sh
    MAINTENANCE OF REGISTER
    SEC 77A(9)
    Securities
    Consideration
    Other
    Dates ofparticulars
    so bought,
    paidas
    cancellation, prescribed& physically
    extinguishing
    destroying of the securities
    FILING A COMPLETION RETURN
    SEC 77A(10)
    Within 30 days of completion of Buyback
    PENALTIES SEC 77A(11)
    a. Imprisonment
    TRANSFER TO CAPTIAL REDEMPTION
    RESERVE ACCOUNT SEC- 77AA
    When a company purchases its own shares out of free re
    PROHIBITION OF BUY BACK UNDER
    CERTAIN CIRCUMSTANCES SEC 77B
    No company shall buy its own shares or specified sec
    SEBI REGULATIONS,
    1998
    EFFECTS OF BUYBACK OF
    a) Effects on the Company:
    SHARES
    SHAREHOLDING PATTERN CHANGES
    Company: A Ltd
    ) Total no of shares 150
    ) Face Value 10
    ) Equity Capital 1500
    ) Buyback of equity shares 25
    ) Max offer price 15
    This can be broadly divided into two parts:

    Particulars Pre buy back Post buy back

    Promoters 50 50
    Non promoters 100 75

    SHAREHOLDING PATTERN IN % TERM


    Particulars Pre buy back Post buy back

    Promoters 33.33 40
    Non promoters 66.67 60
    IMPROVEMENT IN THE FINANCIAL
    RATIOS
    Particulars Pre buy Post buy back
    back
    Cash 1000 625
    Assets 10000 9625
    Earnings 1500 1500
    Outstanding shares 150 125
    Equity shares 1500 1250
    Reserves 200 75
    Shareholders equity 1700 1325
    MP 10 15
    FINANCIAL RATIO
    ROA 0.15 0.16
    ROE 0.88 1.13
    EPS 10 12
    P/E ratio 1 1.25
    EFFECTS OF BUYBACK ON
    SHAREHOLDERS
    er Proportion of shares
    PRICING BUYBACK
    VALUATION OF BUYBACK OF
    SHARES
    Average Closing Price
    WHAT SHOULD YOU LOOK AT BEFORE
    PARTICIPATING IN BUYBACKS?
    Debt-equity ratio
    BUYING DECISIONS
    EPS
    SEBI PULLS PLUG ON
    HOLLOWBUYBACKS
    CASE
    STUDY

    Buy back of shares


    ABOUT THE COMPANY

    1. Beginning Hindustan Vanaspati


    Era of FMCG Company
    Manufacturing
    2. Corporate History Sunlight Soap -1888
    -1931
    Listed onBrothers
    Lifebuoy
    Lever Kolkata,
    1895 Madras
    India &
    3. Listing Bombay
    Lux 1956
    Limited
    10% equity - Indian Shareholders
    Vim.
    -1933
    4. Parentage United
    Part of 40Traders LimitedGroup
    billion Unilever
    5. Turnover -1935
    Hindustan Lever Limited
    Rs.17,523 Cr Audited results for
    6. Employment -1956
    April 1, 2009 to March 3, 2010
    Hindustan Unilever Limited
    -2007
    >15000 direct employees
    SHAREHOLDING OF HUL
    BUYBACK OFFER
    Offered price : Rs 280/share

    Maximum buyback of Shares: 2.25 crore

    Maximum Amount : 630 crore


    (25% of equity share capital)

    Equity and reserves : 218+2450cr

    Cash and bank balance : Rs 1,976.79cr

    Buyback from BSE & NSE through open market purchase


    REASONS FOR
    BUYBACK
    Effective utilization of surplus cash
    Smaller equity base

    EPS MPS
    MPS
    MOVEMENT IN HUL
    SHARE PRICE
    Balance Sheet of HUL Ltd. As on 31-3-2010 (Rupees in crs)
    Particulars 31-3-2010 31-3-2011(E)
    (A) Sources of Funds
    1.Shareholder`s Fund
    Capital 218.17 174.536
    Reserves & Surplus 2,365.35 1,864.394
    2,583.52 2,038.93
    2.Loan Funds
    (a)Secured Loan
    (b)Unsecured Loan
    TOTAL OF (A) 2,583.52 2,038.93

    (B) Applications of Funds
    Net block 2,162.11 2,247.52
    capital work-in progress 273.96 273.96
    Investment 1,264.08 1,264.08
    Deferred Tax 248.82 248.82

    Current Assets, Loans and Advances
    Inventories 2,179.93 2,179.93
    Sundry debtors 678.44 678.44
    Cash and bank balances 1,892.21 1,262.21
    Other current assets 16.62 16.62
    Loans and advances 600.56 600.56
    5,367.76 4,737.76

    Current Liabilities and Provision -6,733.21 -6,733.21


    Net Current Assets -1,365.45 -1,995.45
    TOTAL OF (B) 2,583.52 2,038.93
    DATA 2010 2011 (E) (Rs.
    (Rs. in Crs) in Crs)
    PAT 2,202.03 2,202.03
    Market price of share 239 280
    No. of shares 218.17 174.54
    Total assets/ Net Worth 2,583.52 2038.93

    Assuming PAT to remain same in the year


    2010-11
    Key Financial Ratio (31st March)

    Particulars 2010 2011(E)


    Return on assets 0.85 1.08
    Return on equity 0.85 1.08
    Earning per share 10.09 12.62
    Price earning ratio 23.68 22.18
    PRESENT SCENARIO
    Current Price: Rs.314/share -
    Implications
    Buyback taken place
    Date BSE NSE
    31 Aug 2010 42921 57079
    23 Aug 2010 50060 49940
    Total 92981 107019

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    00
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