Final thesis 25-08-2011 - INFLIBNETshodhganga.inflibnet.ac.in/bitstream/10603/3493/12/12_chapter...

93

CHAPTER -5

ANALYSIS AND FINDINGS

5.1 Impact of share buy-backs on companies’ share price

movements

Share price movements are a result of a bundle of factors such as company

fundamentals, demand and supply of particular scrip and various corporate

announcements and unpredictable global factors. The sensitive Bombay Stock

Exchange and National Stock Exchanges in India etc. react to these factors.

Buy-back of shares an important event also affects the share price movements.

The impact of share buy-back on company’s share price movements are

analysed for three different stages i.e. pre buy-back phase, during buy-back and

post buy- back phase.

5.1.1 Comparison of mean share prices before buy-back and mean

share prices during buyback.

The mean share price before buy-back is the mean of share prices 10 days

before opening of the offer date of each selected sample company. The mean

share price during buy-back is the mean of share prices from the opening of the

offer date of buy-back to the closing of the offer. The period from offer date to

closing date ranges from one month to one year. The mean share prices before

and during are presented in the following Table 3.

94

Table 3

Mean Share Prices before and during buy-back

Sr.

No. Name of Company

A

`̀̀̀

B

`̀̀̀

%

Diff.

1 Selan Exploration Technologies Ltd. 13.26 11.08 -16.44

2 Great Eastern Shipping Ltd 34.84 31.87 -8.52

3 Raymonds Ltd 139.14 116.2 -16.49


5 Finolex Industries Ltd 19.11 27.04 41.50

6 Jayshree Tea and Industries Ltd 60.08 48.6 -19.11

7 Siemens Ltd 197.03 227.42 15.42

8 Winsome Yarns Ltd 6.29 6.8 8.11


10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 43.65 8.47

11 Britannia Industries Ltd 555.74 531.58 -4.35

12 OCL India Ltd 49.01 53.87 9.92

13 Kesoram Industries Ltd 22.17 26.81 20.93

14 Exide Industries Ltd 57.5 73.49 27.81

15 Godrej Consumer Products Ltd 55.53 64.85 16.78

16 Heritage Food (India) Ltd (16) 23.22 25.71 10.72

17 G G Dandekar Machine Works 161.23 236.81 46.88

18 Hindalco Industries Ltd 715.9 722.16 0.87

19 Blue Star Ltd 55.02 67.55 22.77






25 Venky’s (India) Ltd 46.38 47.27 1.92

26 Solitaire Machines Tools Ltd 2.98 4.55 52.68


28 Sun Pharmaceuticals Ltd 600.68 350.4 -41.67



95

Sr.

No. Name of Company

A

`̀̀̀

B

`̀̀̀

%

Diff.

31 ECE Industries Ltd 28.13 37.1 31.89

32 Ace Software Exports Ltd 8.09 9.55 18.05

33 Fine- Line Circuits Ltd 3.83 5.26 37.34

34 Selan Exploration Technologies Ltd. 8.95 14.42 61.12

35 Mazda Ltd 8.92 9.05 1.46



38 Mastek Ltd 245.25 330.29 34.67

39 Avery India Ltd 35.57 39.92 12.23

40 Britannia Industries Ltd 589.98 621.14 5.28

41 Reliance Industries Ltd 530.39 655.36 23.56

42 DIL Ltd 200.89 240.31 19.62


44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 1037.2 42.94

45 Indiabulls Financial Services 162.88 192.07 17.92

46 Prime Securities Ltd 62.74 48.8 -22.22

47 SRF Ltd 199.94 216.74 8.40

48 Natco Pharma Ltd 112.33 133.93 19.23

49 Revathi Equipments Ltd 662.68 683 3.07

50 Gujarat Ambuja Exports Ltd 28.48 41.3 45.01


52 MRO- Tek Ltd 46.59 46.21 -0.82

53 ICI India Ltd 502.62 536.83 6.81

54 Hindustan Unilever Ltd 220.07 223.96 1.77

55 Madras Cements Ltd 3685.86 3436.25 -6.77

56 Reliance Energy Ltd 1365.69 878.05 -35.71

57 Reliance Infra Ltd 526.55 507.22 -3.67

58 Goldiam International Ltd 57.33 41.67 -27.32

59 Great Offshore Ltd 665.78 537.75 -19.23

60 Mastek Ltd 371.48 378.44 1.87

61 SRF Ltd 122.81 93.03 -24.25

62 Patni Computers Ltd 226.22 206.81 -8.58

96

Sr.

No. Name of Company

A

`̀̀̀

B

`̀̀̀

%

Diff.

63 Gateway Distriparks Ltd 90.92 81.41 -10.46

64 Gujarat Fluorochemicals Ltd 191.55 95.36 -50.22

65 Sasken Communications Technologies Ltd 139.47 108.58 -22.15

66 Rain Commodities Ltd 193.01 130.31 -32.49

67 Surana Telecom and Power Ltd 28.85 20.82 -27.83


69 Supreme Industries Ltd 106.2 113.47 6.85

70 E.I.D. Parry India Ltd 141.27 146.47 3.68

71 ANG Auto Ltd 75.69 54.69 -27.74

72 DLF Ltd 311.37 210.17 -32.50

73 GSS America Infotech Ltd 124.51 154.44 24.04

74 Jindal Poly Films Ltd 147.58 250.91 70.02

75 L K P Finance Ltd 59.37 77.86 31.14

76 Mangalam Cement Ltd 48.66 89.48 83.89

77 Monnet Ispat Ltd 128.2 163.56 27.58

78 FDC Ltd 25.1 34.36 36.89

79 T V Today Network Ltd 56.18 85.62 52.40

80 Valiant Communications Ltd 22.31 22.34 0.13

81 Avantel Ltd 43.06 48.54 12.73

82 Godrej Industries Ltd 106.06 133.04 25.44

A=Mean Share Price 10 days before opening of buy-back

B=Mean Share Price during buy-back.

% Difference between A and B = (B-A)/A×100

It is evident from the Table 3 that the difference in the mean share prices of

shares 10 days before opening of the offer date and the mean share prices of

shares during buy-back ranged from (-25%) to 100%. In case of 56 companies

(68%) the mean share prices during buy-back increased more than mean share

prices before buy-back. In case of 20 companies (24.4%), the mean prices

increased by more than 25%. In case of Mangalam Cement Ltd it increased by

(83.89%). Thus, in majority of the cases the mean share prices increased after

97

the announcement of buy-back. However, the mean share prices in 26 cases

declined after announcement. In case of 8 companies, i.e. Sun Pharmaceuticals

Ltd, Reliance Energy Ltd, Goldiam International Ltd, Gujarat Flurochemicals

Ltd, Rain Commodities Ltd, Surana Telecom and Power Ltd, ANG Auto Ltd,

and DLF Ltd the mean share prices declined by more than

(-25%) and in case of 18 companies the mean share prices declined up to

(-25%).

Thus we can conclude that on an average mean share prices have increased

during buy-back as compared to the mean share prices before buy-back as seen

in the case of 56 companies (68%). Therefore, the Ho: The mean share price

before buy-back = the mean share price during buy-back is rejected.

5.1.2 Comparison of the mean share prices during buy-back and

after buy-back

Table 4

Mean Share Prices during and after Buy-Back

Sr.

No. Name of the Company

B

`̀̀̀

C

`̀̀̀

%

Diff.



3 Raymonds Ltd 116.2 103.84 -10.64


5 Finolex Industries Ltd 27.04 26.97 -0.26


7 Siemens Ltd 227.42 303.58 33.49

8 Winsome Yarns Ltd 6.8 6.77 -0.44




12 OCL India Ltd 53.87 48.75 -9.50


98

Sr.


B

`̀̀̀

C

`̀̀̀

%

Diff.




17 G G Dandekar Machine Works 236.81 235.1 -0.72

18 Hindalco Industries Ltd 722.16 629.9 -12.78

19 Blue Star Ltd 67.55 72.72 7.65




23 Godrej Consumer Products Ltd 109.17 106.11 -2.80


25 Venky’s (India) Ltd 47.27 53.99 14.22

26 Solitaire Machines Tools Ltd 4.55 3.73 -18.02


28 Sun Pharmaceuticals Ltd 350.4 513.81 46.64





33 Fine- Line Circuits Ltd 5.26 4.22 -19.77


35 Mazda Ltd 9.05 10.95 20.99



38 Mastek Ltd 330.29 364.85 10.46

39 Avery India Ltd 39.92 43.56 9.12



42 DIL Ltd 240.31 333.37 38.72

99

Sr.


B

`̀̀̀

C

`̀̀̀

%

Diff.



45 Indiabulls Financial Services 192.07 188.13 -2.05

46 Prime Securities Ltd 48.8 60.19 23.34

47 SRF Ltd 216.74 235.7 8.75

48 Natco Pharma Ltd 133.93 116.2 -13.24

49 Revathi Equipments Ltd 683 878.91 28.68


51 Ace Software Exports Ltd 16.94 16.54 -2.36

52 MRO- Tek Ltd 46.21 45.30 -1.97

53 ICI India Ltd 536.83 496.66 -7.48




57 Reliance Infra Ltd 507.22 688.03 35.65



60 Mastek Ltd 378.44 345.34 -8.75

61 SRF Ltd 93.03 83.11 -10.66








69 Supreme Industries Ltd 113.47 113.32 -0.13

70 E.I.D.Parry (India) Ltd 146.47 133.14 -9.10

71 ANG Auto Ltd 54.69 39.8 -27.23

100

Sr.


B

`̀̀̀

C

`̀̀̀

%

Diff.

72 DLF Ltd 210.17 251.81 19.81



75 L K P Finance Ltd 77.86 86.53 11.14


77 Monnet Ispat Ltd 163.56 287.58 75.83

78 FDC Ltd 34.36 42.15 22.67



81 Avantel Ltd 48.54 49.21 1.38


B= Mean Share Price during buy-back

C= Mean Share Price 10 days after closing of buy-back

% Difference between B and C above = (C-B)/B x100.

As observed in the Table 4 the mean share prices of shares 10 days after

buy-back depicted positive signs in majority of the companies. The mean share

prices reacted positively in case of 46 companies (56%) after buy-back as

compared to mean share prices during buy-back and increased up to 25% in

case of 28 companies; and increased between 25 to 50% in case of 15

companies . At the same time, the mean share prices declined up to (-25%) in

case of 30 companies. In case of 6 companies the decline of the mean share

prices after buy-back as compared to mean share prices during buy-back

ranged between (-25%) to (-57.38%) i.e. Reliance Energy Ltd (-38.33%),

Goldiam International Ltd (-57.38%), Patni Computers Ltd (-33.37%),

Sasken Technologies Ltd (-29.28%), Rain Commodities Ltd (-32.39%) and

ANG Auto Ltd (-27.23%). Therefore the Ho: i.e. Mean share price during

buy-back = Mean share price after buyback is rejected.

101

5.1.3 Comparison of mean share prices in pre and post buy-back

phase.

Table 5

Mean Share Prices 10 days after and 10 days before buy-back

Sr.

No. Name of Company

C

`̀̀̀

A

`̀̀̀ %

Diff.



3 Raymonds Ltd 103.84 139.14 -25.37




7 Siemens Ltd 303.58 197.03 54.08





12 OCL India Ltd 48.75 49.01 -0.53







19 Blue Star Ltd 72.72 55.02 32.17






25 Venky’s (India) Ltd 53.99 46.38 16.41


102

Sr.

No. Name of Company

C

`̀̀̀

A

`̀̀̀ %

Diff.









35 Mazda Ltd 10.95 8.92 22.76



38 Mastek Ltd 364.85 245.25 48.77

39 Avery India Ltd 43.56 35.57 22.46



42 DIL Ltd 333.37 200.89 65.95





47 SRF Ltd 235.7 199.94 17.89

48 Natco Pharma Ltd 116.2 112.33 3.45

49 Revathi Equipments Ltd 878.91 662.68 32.63



52 MRO- Tek Ltd 45.30 46.59 -2.77

53 ICI India Ltd 496.66 502.62 -1.19





103

Sr.

No. Name of Company

C

`̀̀̀

A

`̀̀̀ %

Diff.



60 Mastek Ltd 345.34 371.48 -7.04

61 SRF Ltd 83.11 122.81 -32.33










71 ANG Auto Ltd 39.8 75.69 -47.42

72 DLF Ltd 251.81 311.37 -19.13



75 L K P Finance Ltd 86.53 59.37 45.75


77 Monnet Ispat Ltd 287.58 128.2 124.32

78 FDC Ltd 42.15 25.1 67.93



81 Avantel Ltd 49.21 43.06 14.28


A= Mean Share Prices 10 days before buy-back

C= Mean Share Prices 10 days after buy-back

% Difference between A and C = (C-A)/A ×100

It is evident that the mean share prices after 10 days of buy-back increased in

case of 55 companies (67%) as compared to pre buy-back phase. The increase

104

was more than 100% in case of three companies namely, Gujarat Ambuja

Exports Ltd 173.60%, Mangalam Cement Ltd 177.15% and Monnet Ispat Ltd

124.32%. In case of 22 companies it increased up to 25%; in case of 15

companies it increased up to 50%; in case of 10 companies it increased up to

75% as compared to mean share prices before buy-back. At the same time, the

decline in mean share prices of Reliance Energy Ltd (-60.35%), Goldiam

International Ltd (-69.02%), Gujarat Fluorochemicals Ltd (-61.36%) and Rain

Commodities Ltd (-54.35%) was more than (-50%) after buy-back as

compared to mean share prices before buy-back while in case of 15 companies

the decline was between 0 to (-25%). Therefore, Ho: the mean share price after

buy-back = the share price before buy-back is rejected.

5.1.4 Phase-Wise Analysis of Share Price Movements

We can study the share price movements by dividing the period of study into

four phases based on global events: According to global events the first phase

is from 1999 to 2002 when the market remained dampen because of technology

meltdown (2000) and World Trade Centre (WTC); the second phase from

2004 to mid 2007, is characterized by the revival of private foreign capital

flows to emerging market economies in an environment of liberalization,

flexible exchange rates and strong economic growth, commonly known as

bull-run period; the third phase from 2007 to early 2009 also known as bear

phase, shows how severely stock market fell after the global subprime crisis;

the fourth phase from mid 2009 onwards is the revival stage.

During the first phase from 1999 to 2002 when market remained dampen

because of technology meltdown (2000) and WTC, majority of the buy-backs

i.e. 12 out of 18 showed a negative trend. Except for six companies

i.e. Seimens Ltd, Bombay Dyeing And Manufacturing Ltd, Kesoram Ltd,

Exide Industries Ltd, Godrej Consumer Products Ltd and Heritage Food (India)

Ltd, the mean share prices of 12 companies which offered and completed

buy-back during 2000-2002 declined during buyback period. The period

during which buy-back took place in case of seven companies out of 18

105

companies i.e Finolex Industries Ltd, Jayshree Tea and Industries Ltd,

Seimens Ltd, Great Eastern Shipping Co. Ltd, Bombay Dyeing and

Manufacturing Co. Ltd, Kesoram Ltd and Exide Industries Ltd were more than

9 months.

The second phase (2003 to mid 2007), is characterized by the revival of private

foreign capital flows to emerging market economies in an environment of

liberalization, flexible exchange rates and strong economic growth, commonly

known as bull-run period. This is reflected in the increase in the prices of the

companies which offered buy-back. Out of 45 companies, in case of only

2 companies, there was a decline in the mean share prices, while 43 companies

recorded an increase in the mean share prices. The mean share prices of Selan

Exploration Techonologies Ltd in April 2002-January 2003 gradually declined

in all three periods of buy-back and in case of Sun Pharmaceuticals Ltd the

mean share prices declined after the opening of the offer, increased during the

buy-back and finally recorded a decline over the mean share price before

buy -back.

The third phase (2007 to early 2009) is also known as bear phase, as stock

market fell after the global subprime crisis. 16 companies out of 18 companies

recorded a decline in the mean share prices during the bear phase. In case of

two companies the rise was marginal i.e. 2.77% in case of Godrej Consumer

Products Ltd and 6.70% in case of Supreme Industries Ltd.

The fourth phase from mid 2009 onwards shows the revival stage. The effect of

market is depicted in the difference in mean share prices of the companies

before and after buy-back of shares. The mean share prices increased by

177.15% in case of Mangalam Cement Ltd, and 124.32% in case of Monnet

Ispat Ltd. In case of 6 companies, the difference between the post buy-back and

pre-buy-back was more than 40%. The post buy-back bounce within a period

of six months benefited the share holders who did not participated in the

buy-back programme.

Inspite of all the efforts introduced by the companies to revive share prices

through buy-backs; we observed that during the bear phase following the

106

subprime crisis, the prices of shares recorded a negative trend up to May 2009

followed by a noticeable bounce back in the revival phase. The very purpose of

buy-back seemed to be fulfilled in the last phase which is to restore true value

of shares in a dampened market. Thus, we can conclude that merely signaling

effect of announcement of buy-back is not sufficient to make good the

undervaluation of shares, but an additional boost from the market is also

necessary.

107

5.1.5 Industry-wise trend of mean share price

Table 6

Industry-wise trend of Mean Share Price

Share price movements of the companies going in for buy-back are examined to know the industry-wise trend of mean share prices.

NIC CLASSIFED INDUSTRIES

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

A-AGRICULTURE, FORESTRY AND FISHING

50 Gujarat Ambuja Exports Ltd 28.48 41.3 77.92 45.01 88.67 173.60

B-MINING AND QUARRYING - COAL, SUPPORT ACTIVITIES FOR PETROLEUM

1 Selan Exploration Technologies Ltd. 13.26 11.08 13.32 -16.44 20.22 0.45

4 Selan Exploration Technologies Ltd. 11.13 11.05 9.07 -0.72 -17.92 -18.51

20 Selan Exploration Technologies Ltd. 10.47 9.51 8.51 -9.17 -10.52 -18.72

C-MANUFACTURING

1 - PACKAGED FOODS, FOOD PROCESSING.

11 Britannia Industries Ltd 555.74 531.58 607.73 -4.35 14.33 9.36

16 Heritage Food (India) Ltd (16) 23.22 25.71 27.12 10.72 5.48 16.80

24 Britannia Industries Ltd 523.16 517.62 537.85 -1.06 3.91 2.81

108

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

25 VENKY'S (INDIA) LTD. 46.38 47.27 53.99 1.92 14.22 16.41

40 Britannia Industries Ltd 589.98 621.14 629.39 5.28 1.33 6.68

2- BEVERAGES

6 Jayshree Tea and Industries Ltd 60.08 48.6 44.26 -19.11 -8.93 -26.33

3-SUGAR

70 E.I.D.Parry (India) Ltd 141.27 146.47 133.14 3.68 -9.10 -5.75

4 –TEXTILES

3 Raymonds Ltd 139.14 116.2 103.84 -16.49 -10.64 -25.37

8 Winsome Yarns Ltd 6.29 6.8 6.77 8.11 -0.44 7.63

10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 43.65 48.57 8.47 11.27 20.70

21 Winsome Yarns Ltd 6.39 7.27 7.29 13.77 0.28 14.08

27 Bombay Dyeing And Manufacturing Co. Ltd 42.18 53.28 68.2 26.32 28.00 61.69

41 Reliance Industries Ltd 530.39 655.36 901.94 23.56 37.63 70.05

47 SRF Ltd 199.94 216.74 235.70 8.40 8.75 17.89

61 SRF Ltd 122.81 93.03 83.11 -24.25 -10.66 -32.33

109

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

5-PLASTICS

5 Finolex Industries Ltd 19.11 27.04 26.97 41.50 -0.26 41.13

22 Finolex Industries Ltd 31.53 33.31 40.11 5.65 20.41 27.21

69 Supreme Industries Ltd 106.2 113.47 113.32 6.85 -0.13 6.70

6-PERSONAL PRODUCTS

15 Godrej Consumer Products Ltd 55.53 64.85 81.69 16.78 25.97 47.11

23 Godrej Consumer Products Ltd 93.36 109.17 106.11 16.93 -2.80 13.66






54 Hindustan Unilever Ltd 220.07 223.96 245.66 1.77 9.69 11.63

7-COMMODITY CHEMICALS

74 Jindal Poly Films Ltd 147.58 250.91 259.36 70.02 3.37 75.74

82 Godrej Industries Ltd 106.06 133.04 153.73 25.44 15.55 44.95

110

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

8-INDUSTRIAL GASES

64 Gujarat Fluorochemicals Ltd 191.55 95.36 74.02 -50.22 -22.38 -61.36

9-PAINTS & VARNISHES

53 ICI India Ltd 502.62 536.83 496.66 6.81 -7.48 -1.19

10-PHARMECUETICALS

28 Sun Pharmaceuticals Ltd 600.68 350.4 513.81 -41.67 46.64 -14.46

42 DIL Ltd 200.89 240.31 333.37 19.62 38.72 65.95

44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 1037.2 1428.45 42.94 37.72 96.86

48 Natco Pharma Ltd 112.33 133.93 116.2 19.23 -13.24 3.45

78 FDC Ltd 25.1 34.36 42.15 36.89 22.67 67.93

11-IRON &STEEL&INTERMEDIATE PRODUCTS INTERMEDIATE PRODUCTS

77 Monnet Ispat Ltd 128.2 163.56 287.58 27.58 75.83 124.32

12-CONSUMER ELECTRONICS

19 Blue Star Ltd 55.02 67.55 72.72 22.77 7.65 32.17

13-HEAVY ELECTRICALS & ELECTRICAL UTILITIES

7 Siemens Ltd 197.03 227.42 303.58 15.42 33.49 54.08

111

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

31 ECE Industries Ltd 28.13 37.1 50.18 31.89 35.26 78.39

33 Fine- Line Circuits Ltd 3.83 5.26 4.22 37.34 -19.77 10.18

14-ENGINEERING, INDUSTRIAL MACHINERY & ALUMINIUM

17 G G Dandekar Machine Works 161.23 236.81 235.1 46.88 -0.72 45.82

18 Hindalco Industries Ltd 715.9 722.16 629.9 0.87 -12.78 -12.01

26 Solitaire Machines Tools Ltd 2.98 4.55 3.73 52.68 -18.02 25.17

35 Mazda Ltd 8.92 9.05 10.95 1.46 20.99 22.76

39 Avery India Ltd 35.57 39.92 43.56 12.23 9.12 22.46

49 Revathi Equipments Ltd 662.68 683 878.91 3.07 28.68 32.63

15-AUTO PARTS

14 Exide Industries Ltd 57.5 73.49 89.81 27.81 22.21 56.19

71 ANG Auto Ltd 75.69 54.69 39.8 -27.74 -27.23 -47.42

16-DIAMOND CUTTING & PRECIOUS METAL JEWELLERY

58 Goldiam International Ltd 57.33 41.67 17.76 -27.32 -57.38 -69.02

17-DIVERSIFED

13 Kesoram Industries Ltd 22.17 26.81 35.3 20.93 31.67 59.22

112

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

30 Kesoram Industries Ltd 26.89 33.34 46.3 23.99 38.87 72.18

18-CEMENT,CEMENT PRODUCTS & IRON

12 OCL India Ltd 49.01 53.87 48.75 9.92 -9.50 -0.53

55 Madras Cements Ltd 3685.86 3436.25 3281.7 -6.77 -4.50 -10.97

66 Rain Commodities Ltd 193.01 130.31 88.1 -32.49 -32.39 -54.35

76 Mangalam Cement Ltd 48.66 89.48 134.86 83.89 50.72 177.15

D-ELECTRICITY,GAS STEAM AND AIR CONDITIONING SUPPLY

56 Reliance Energy Ltd 1365.69 878.05 541.45 -35.71 -38.33 -60.35

57 Reliance Infra Ltd 526.55 507.22 688.03 -3.67 35.65 30.67

F-CONSTRUCTION & REAL ESTATE ACTIVITIES

72 DLF LTD 311.37 210.17 251.81 -32.50 19.81 -19.13

H-TRANSPORTATION AND STORAGE

1-SHIPPING

2 Great Eastern Shipping Ltd 34.84 31.87 27.95 -8.52 -12.30 -19.78

9 Great Eastern Shipping Ltd 29.2 28.77 28.59 -1.47 -0.63 -2.09

59 Great Offshore Ltd 665.78 537.75 510.23 -19.23 -5.12 -23.36

113

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

2-TRANSPORTATION & STORAGE

63 Gateway Distriparks Ltd 90.92 81.41 65.45 -10.46 -19.60 -28.01

J-INFORMATION AND COMMUNICATION

1-COMPUTER SOFTWARE PRODUCTION

32 Ace Software Exports Ltd 8.09 9.55 11.49 18.05 20.31 42.03

38 Mastek Ltd 245.25 330.29 364.85 34.67 10.46 48.77

51 Ace Software Exports Ltd 16.08 16.94 16.54 5.35 -2.36 2.86

60 Mastek Ltd 371.48 378.44 345.34 1.87 -8.75 -7.04

62 Patni Computers Ltd 226.22 206.81 137.79 -8.58 -33.37 -39.09

2-IT CONSULTING AND SOFTWARE

65 Sasken Communications Technologies Ltd 139.47 108.58 76.79 -22.15 -29.28 -44.94

73 GSS America Infotech Ltd 124.51 154.44 175.11 24.04 13.38 40.64

3-COMPUTER HARDWARE

52 MRO- Tek Ltd 46.59 46.21 45.30 -0.82 -1.97 -2.77

4-TELECOM CABLES & EQUIPMENTS

67 Surana Telecom and Power Ltd 28.85 20.82 17.24 -27.83 -17.20 -40.24

114

Sr.

No. Company

A

`̀̀̀

B

`̀̀̀

C

` ` ` `

(B-A)

x 100/A

(C-B)

x 100/B

(C-A)

x 100/A

80 Valiant Communications Ltd 22.31 22.34 28.37 0.13 26.99 27.16

81 Avantel Ltd 43.06 48.54 49.21 12.73 1.38 14.28

K- INFORMATION AND COMMUNICATION - BROADCASTING & CABLE T V

79 T V Today Network Ltd 56.18 85.62 94.26 52.40 10.09 67.78

L-FINANCIAL AND INSURANCE ACTIVITIES -

45 Indiabulls Financial Services 162.88 192.7 188.13 17.92 -2.05 15.50

46 Prime Securities Ltd 62.74 48.8 60.19 -22.22 23.34 -4.06

75 L K P Finance Ltd 59.37 77.86 86.53 31.14 11.14 45.75

A = Mean share prices before Buy-back

B = Mean share prices during Buy-back

C = Mean share prices after Buy-back

(B-A) ×100 =% Difference in mean share price before and during Buy-Back A

(C-B) ×100 =% Difference in mean share price during and after Buy-back C

(C-A) ×100 =% Difference in mean share price after and before Buy-back

A

115

Industries classified on the basis of NIC classification-wise reported a mixed

pattern of mean share prices movements before buy-back, during the buy-back

offer and after the closure of buy-back programme

A. Agriculture, Forestry and Fishing

Gujarat Ambuja Exports Ltd was the only company under this category which

declared and completed buy-back. It registered an abnormal gain of 173.60% in

mean share price after buy-back as compared to mean share price before

buy-back.

B. Mining and Quarrying

Under this industry, Selan Exploration Technologies Ltd completed four

buy-back programmes. It recorded a decline of more than 18% in mean share

prices during second and third buy-back programmes. However, in the first

buy-back there was a nominal rise of 0.45% and in the last buy-back there was

an increase of 92.74% in the mean share prices after buy-back.

C. Manufacturing Industries

1. Packaged Foods and Food Processing

As evident from Table 6, major manufacturing industries in Packaged Foods

and Food Processing registered a nominal gain up to 17%. In case of multiple

buy-backs by Britannia Industries Ltd the percentage gain in the mean share

prices was nominal i.e. 9.35%, 2.81% and 6.68% during first, second and third

buy-back respectively.

2. Beverages

The mean share prices of Jayshree Tea and Industries Ltd under this declined to

the extent of (-26.33%) after buy-back. Thus there was a negative trend in this

industry.

116

3. Sugar

The only company E.I.D.Parry (India) Ltd registered a rise of 3.68% in mean

share price during the buy-back offer but the mean share price declined by

(-5.75%) as compared to the mean share price before buy-back.

4. Textile Industries

In case of Textile Industries, especially Reliance Industries Ltd and double

buy-backs at different times by Winsome Yarns Ltd and Bombay Dyeing and

Manufacturing Co. Ltd reacted positively after buy-back. However, SRF Ltd.

which had reacted positively i.e. increase of 17.89% in the first buy-back

programme, recorded a decline of 32.32% in the second buy-back programme.

5. Plastics

In case of Plastic Industry, though there was a marginal decline of less than 1%

in mean share prices after buy-back as compared to mean share prices during

buy-back, the net effect of buy-back from offer date to closure date was

positive and it was more than 27% in case of double buy-back offer by Finolex

Industries Ltd.

6. Personal Products

Buy-back in personal products industries is featured by 7 different buy-backs

by Godrej Consumer Products Ltd. and only one by Hindustan Unilever Ltd. In

this industry after buy-back the net effect as depicted in mean share prices was

not only positive but was also noticeable i.e. on an average the gain in mean

share prices was more than 40% in 4 buy-backs by Godrej Consumer Products

Ltd and in case of other buy-backs by Godrej Consumer Products Ltd there was

a marginal increase of less than 15% in mean share prices. The shareholders

who did not participate in the buy-back programme stood to gain.

7. Commodity Chemicals

Both the companies recorded a handsome gain of over 44% over the mean

share prices before buy-back. Thus, the shareholders of Jindal Poly Films Ltd

117

and Godrej Industries Ltd who did not participate in the buy-back programme

gained as compared to those who participated in the buy-back programme.

8. Industrial Gases

The mean share prices of Gujarat Fluorochemicals Ltd under Industrial Gases

were discouraging to the extent of (-61.36%) and those who participated in the

programme gained than those who did not participate in the buy-back

programme.

9. Paints and Varnishes

ICI India Ltd was the only company who offered buy-back programme in this

industry. The mean share price increased during buy-back by 6.84%, but the

company recorded a marginal fall of (-1.19%) in mean share price after

buy-back as compared to mean share price before buy-back.

10. Pharmaceuticals

In case of Pharmaceuticals except for Sun Pharmaceuticals Ltd. and Natco

Pharma Ltd, all the companies recorded a handsome gain of over 65.95% over

the mean share prices before buy-back.

11. Iron and Steel and Intermediate Products

There was only one company Monnet Ispat Ltd under Iron and Steel and

Intermediate Products which resulted in an increase of 124.32% over the mean

share prices before buy-back.

12. Consumer Electronics

Only one company namely Blue Star Ltd which completed buy-back under this

industry gained moderately after buy-back as the mean share price after

buy-back increased by 32.17% over the mean share price before buy-back.

118

13. Heavy Electricals and Electrical Utilities

Both Siemens Ltd and ECE Industries Ltd recorded an increase of more than

50% in mean share prices after buy-back. However, Fine Line Circuits Ltd

gained a nominal rise of 10.18% over the mean share price before buy-back.

14. Engineering Industrial Machinery and Aluminum sector

Except for Hindalco Industries Ltd which registered a fall in the mean share

price of (-12.01%) after buy-back, there was a moderate rise of about 22% to

32.63% in the mean share prices of companies in the Engineering Industrial

Machinery and Aluminum sector.

15. Auto Parts Industry

Auto Parts Industry showed a mixed trend. While in the case of Exide

Industries Ltd the mean share prices rose up to 56.18%, in the case of ANG

Auto Ltd the mean share prices declined up to (-47.42%).

16. Diamond Cutting and Precious Metal Jewellery

The mean share prices in this industry since the opening of the offer of

buy-back were discouraging and Goldiam International Ltd under this industry

reacted negatively to the extent of (-69.02%) after buy-back.

17. Diversified Industries

Under Diversified Industries, Kesoram Ltd was the only company with two

different buy-backs and in both the cases, the mean share prices were positive

and reported an increase of 59% in the first and 72.20% in the second buy-back

respectively over the mean share prices before buy-back.

18. Cement

This industry showed a mixed trend. While the mean share prices of OCL India

Ltd and Madras Cement Ltd declined marginally up to (-10.97%) and Rain

Commodities Ltd declined up to (-54.35%), Mangalam Cement Ltd recorded a

119

rise of 177.15% after buy-back as compared to the mean share prices before

buy-back.

D. Electricity, Gas, Steam and Air - Conditioning Supply

There were multiple buy-backs by Reliance Energy Ltd and the mean share

prices reacted differently during the two buy-backs of the company. It declined

up to (-69.35%) in the first buy-back but gained 30.67% in the second

buy-back.

F. Construction and Real Estate

Though the mean share prices of DLF Ltd declined by (-32%) during buy-back

and gained by 19.81% after buy-back there was an overall decline of

(-19.13%) over the mean share price before buy-back.

H. Transportation and Storage

The mean share prices of the companies under this industry recorded a negative

trend and in all the buy-back events, the mean share prices declined after

opening of the offer. Great Eastern Shipping Ltd exhibited a marginal decline

of (-19%) and (-2.09%) in two different buy-backs respectively, but the decline

in case of two other companies was more than (-25%).

J. Information and Communication Sector

1. Computer Software Production

A mixed trend was noticed in 3 companies of Computer Software Production

industry. The mean share prices in 3 companies i.e Ace Software Exports Ltd

(42.03%) and Mastek Ltd (48.77%) in the first buy-back and Ace Software Ltd

in the second buy-back (2.86%) were positive after buy-back as compared to

the mean share prices before buy-back. The mean share prices of Mastek Ltd in

the second buy-back and Patni Computers Ltd were negative after buy-back.

120

2. IT Consulting and Software

While the mean share price of Sasken Communications Technologies Ltd

declined by (-44.94%) after buy-back the mean share prices of GSS

America Infotech Ltd increased by (40.64%) after buy-back.

3. Computer Hardware

MRO-Tek registered a nominal decline of (-2.77%) in mean share prices

after buy-back as compared to mean share prices before buy-back.

4. Telecom Cables and Equipments

Out of the three companies in this industry, the mean share prices of

Surana Telecom and Power Ltd declined after buy-back, while the mean

share prices of Valiant Communications Ltd and Avantel Ltd registered a

rise of more than 14%.

K. Information and Communication – Broadcasting and Cable T V

The mean share prices of T V Today Network Ltd under this industry reacted

positively in all the three periods of buy-back and the shareholders who did not

participate in the buy-back gained after buy-back.

L. Financial and Insurance Activities

Likewise, companies under Financial and Insurance activities showed a mixed

trend. The rise in mean share prices in case of LKP Finance Ltd was moderate

i.e. 45.73% and in case of Indiabulls Financial Services Ltd the rise in mean

share price was marginal 15.51% after buy-back. The only company in this

sector Prime Securities Ltd. reported a marginal decline of (-4.06%) in mean

share price after buy-back.

Thus, the companies which announced and completed buy-back depicted a

mixed pattern and not all companies exhibited similar trend. The industries that

gained in the buy-back programme include Agriculture Forestry, and Fishing,

Plastics, Personal Products, Commodity Chemicals, Iron and Steel,

121

Engineering Industrial Machinery and Aluminium, Diversified, Consumer

Electronics, Heavy Electrical and Electrical Utilities and Financial and

Insurance Activities. The industries that showed a negative trend included

Mining and Quarrying, Beverages, Transportation and Storage and Logistics.

5.2 The Effect of share Buy-backs on operating efficiency of the

companies.

Does the buy-back of share affect the operating efficiency of a company? An

effort has been made to find out whether companies offering buy-back increase

their operating efficiency or not. For this purpose, a comparison of the net

profit ratios, return on net worth ratios, current ratios, earnings per share (EPS)

and book values were considered. These ratios were calculated one year before

buy-back and one year after buy-back to know the increase or decrease in

operating efficiency.

5.2.1 Net Profit Ratio

Table 7

Net Profit Ratio

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.


2 Great Eastern Shipping Ltd 12.24 17.79 45.34

3 Raymonds Ltd 2.17 9.96 358.99



6 Jayshree Tea and Industries Ltd -0.94 4.88 619.15

7 Siemens Ltd 5.93 9.77 64.76




122

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.


12 OCL India Ltd 2.2 5.89 167.73





17 G G Dandekar Machine Works -30.38 27.01 188.91


19 Blue Star Ltd 5.44 4.68 -13.97






25 Venky’s (India) Ltd 4.1 5.3 29.27

26 Solitaire Machines Tools Ltd 6.46 7.3 13

27 Bombay Dyeing And Manufacturing Co. Ltd -3.6 2.58 171.67



30 Kesoram Industries Ltd 46.62 2.36 -94.94

31 ECE Industries Ltd 10.11 1.65 -83.68




35 Mazda Ltd 6.45 8.24 27.75



38 Mastek Ltd 10.35 12.74 23.09

39 Avery India Ltd 5.4 7.16 32.59


41 Reliance Industries Ltd 11.49 10.69 -6.96

123

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

42 DIL Ltd 45.32 476 950.31





47 SRF Ltd 8.07 8.54 5.82

48 Natco Pharma Ltd 14.64 15.72 7.38


50 Gujarat Ambuja Exports Ltd 3.34 1.94 -41.92


52 MRO- Tek Ltd 9.55 2.65 -72.25

53 ICI India Ltd 50.51 32.5 -35.66

54 Hindustan Unilever Ltd 12.74 12.2 -4.24




58 Goldiam International Ltd -0.11 8.61 7927.27


60 Mastek Ltd 17.01 16.26 -4.41

61 SRF Ltd 8.54 14.15 65.69


63 Gateway Distriparks Ltd 45.58 48.69 6.82


65 Sasken Communications Technologies Ltd 6.41 18.94 195.48

66 Rain Commodities Ltd 5.48 18.32 234.31




70 E.I.D.Parry (India) Ltd -2.55 17.89 801.57

71 ANG Auto Ltd 11.9 6.79 -42.94

72 DLF Ltd 46.83 28.03 -40.15

124

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

73 GSS America Infotech Ltd 64.96 28.78 -55.7


75 L K P Finance Ltd 86.75 60.5 -30.26


77 Monnet Ispat Ltd 14.34 18.17 26.71

78 FDC Ltd 13.39 22.91 71.1

79 T V Today Network Ltd 13.42 10.83 -19.3

80 Valiant Communications Ltd 20.43 10.64 -47.92

81 Avantel Ltd 9.83 5.71 -41.91


% Difference = % difference in net profit ratios before buy-back and after

buy-back

The net profit margin ratio of a company is indicative of management’s ability

to operate the business with sufficient success to leave a reasonable

compensation to the owners for providing their capital at risk. A high net profit

ratio would ensure adequate return to the owners as well as enable a firm to

withstand adverse economic conditions when selling price is declining, cost of

production is rising and demand for product is falling. A lower net profit ratio

has opposite implications.

The net profit ratios of companies before and after buy-back as shown in Table

7 revealed that 59.76% of the company buy-backs registered a rise in net profit

ratio after buy-back. Out of these companies 4 companies namely Jayshree

Tea and Industries Ltd, E I D Parry (India) Ltd, Dil Ltd and Goldiam

International Ltd, registered a rise of more than 500% after buy-back.

However, 22 companies registered a decline up to 50% in net profit ratio. Also

there was a decline of more than 75% in 4 companies only - Sun

Pharmaceuticals Ltd (-98.97%), Kesoram Industries Ltd (-94.94%), Surana

Telecom and Power Ltd (-84.37%) and ECE Industries Ltd (-83.68%).

125

5.2.2 Return on Net Worth

Table 8

Return on Net worth Ratio

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

1 Selan Exploration Technologies Ltd. 0.7 3 328.57


3 Raymonds Ltd 3.92 9.84 151.02




7 Siemens Ltd 21.41 28.38 32.55





12 OCL India Ltd 4.09 12.75 211.74







19 Blue Star Ltd 24.64 25 1.46

20 Selan Exploration Technologies Ltd. 3 2.44 -18.67





25 Venky’s (India) Ltd 14.64 18.55 26.71



126

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.








35 Mazda Ltd 12.22 25.66 109.98



38 Mastek Ltd 9.55 24.3 154.45

39 Avery India Ltd 11.84 12.58 6.25



42 DIL Ltd 7.07 6.77 -4.24





47 SRF Ltd 17.47 14.28 -18.26

48 Natco Pharma Ltd 22.81 16.57 -27.36




52 MRO- Tek Ltd 11.63 3.52 -69.73

53 ICI India Ltd 51.56 30.34 -41.16

54 Hindustan Unilever Ltd 122.92 121.3 -1.32




127

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.


59 Great Offshore Ltd 22.88 30.48 33.22

60 Mastek Ltd 34.02 27.35 -19.61

61 SRF Ltd 14.28 24.4 70.87

62 Patni Computers Ltd 15.15 16.94 11.82

63 Gateway Distriparks 11.61 11.55 -0.52








71 ANG Auto Ltd 18.9 7.89 -58.25

72 DLF Ltd 22.84 5.96 -73.91



75 L K P Finance Ltd 68.76 13.87 -79.83

76 Mangalam Cement Ltd 33.01 30.71 -6.97

77 Monnet Ispat Ltd 15.26 16.26 6.55

78 FDC Ltd 17.52 28.39 62.04



81 Avantel Ltd 14.53 7.77 -46.52


% Difference = % difference between return on net worth before buy-back and

after buy-back.

Return on net worth is one of the most important ratio used for measuring the

overall efficiency of a firm. This ratio is of great importance to the present and

128

prospective shareholders as well as the management of the company. This ratio

reveals how well the resources of the firm are being used. Higher the ratio

better is the overall efficiency of the company. The shareholders are the real

owners of the company and they are ultimately affected in the buy-back

programme and hence, the return on net worth of the company should be

assessed.

Table 8 reveals that 43 companies (52%) recorded an increase in net worth

after buy-back and in 4 cases – Selan Exploration Technologies Ltd, Jayshree

Tea and Industries Ltd, E I D Parry (India) Ltd, and Goldiam International Ltd

the increase in net worth was more than 500% as compared to the net worth of

the companies before buy-back. At the same time, in 39 cases there was a

decline in return on net worth. A decline of more than 75% was noticed in ECE

Industries Ltd, Surana Telecom and Power Ltd, and LKP Finance Ltd.

5.2.3 Current Ratio

Table 9

Current Ratio

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.



3 Raymonds Ltd 2.95 2.68 -9.15




7 Siemens Ltd 1.1 1.31 19.09



10 Bombay Dyeing And Manufacturing Co. Ltd 4.77 1.83 -61.64


12 OCL India Ltd 3.1 1.86 -40.00


129

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

14 Exide Industries Ltd 1.87 1.36 -27.27



17 G G Dandekar Machine Works 4.13 3.37 -18.40


19 Blue Star Ltd 1.3 1.34 3.08






25 Venky’s (India) Ltd 1.39 1.46 5.04

26 Solitaire Machines Tools Ltd 2.24 1.53 -31.70


28 Sun Pharmaceuticals Ltd 2.78 5.68 104.32







35 Mazda Ltd 1.56 1.85 18.59



38 Mastek Ltd 1.23 1.19 -3.25

39 Avery India Ltd 0.65 1.13 73.85



42 DIL Ltd 8.36 2.43 -70.93


44 Glaxo Smithkline Pharmaceuticals Ltd 1.12 0.94 -16.07

130

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

45 Indiabulls Financial Services 7.07 4.09 -42.15


47 SRF Ltd 1.01 1.18 16.83

48 Natco Pharma Ltd 2.06 2.04 -0.97




52 MRO- Tek Ltd 2.63 3.18 20.91

53 ICI India Ltd 0.81 0.79 -2.47





58 Goldiam International Ltd 7 4.52 -35.43


60 Mastek Ltd 1.17 1.09 -6.84

61 SRF Ltd 1.18 1.21 2.54






67 Surana Telecom and Power Ltd 3.53 8.86 150.99




71 ANG Auto Ltd 5.44 3.97 -27.02

72 DLF Ltd 4.85 5.47 12.78



75 L K P Finance Ltd 3.72 2.92 -21.51

131

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.


77 Monnet Ispat Ltd 3.57 2.94 -17.65

78 FDC Ltd 1.41 1.12 -20.57



81 Avantel Ltd 2.65 4.28 61.51

82 Godrej Industries Ltd 1.71 1.39 -18.71

% Difference = % difference in current ratio before buy-back and after

buy-back

The current ratio of a company is the ratio of total current assets to current

liabilities and it measures short-term solvency, i.e. the ability of the company to

meet short-term obligations and is a margin of safety to the creditors.

Industry-wise the current ratios differ and depend on the working capital policy

and financial strategy of the company. Buy-back of shares affect the short-term

liquidity position of companies.

It is found that the general liquidity position of the companies as indicated in

Table 9, increased in the case of 36 companies after buy-back. In case of 46

companies there was a decline in current ratio, but the ratios after buy-back

were more than 1.This is a positive indication to the creditors. Inspite of

buy-back programme, the short term liquidity was not affected adversely.

132

5.2.4. Earnings per Share (EPS)

Table 10

Earnings per Share

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.



3 Raymonds Ltd 4.22 14.36 240.28




7 Siemens Ltd 20.44 42.06 105.77





12 OCL India Ltd 8.54 25.68 200.70







19 Blue Star Ltd 14.22 18.1 27.29






25 Venky’s (India) Ltd 10.52 17.17 63.21




133

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.







35 Mazda Ltd 2.2 6.96 216.36



38 Mastek Ltd 8.83 17.51 98.30

39 Avery India Ltd 3.64 4.77 31.04



42 DIL Ltd 21.07 20.77 -1.42





47 SRF Ltd 16.24 20.44 25.86

48 Natco Pharma Ltd 8.76 15.24 73.97




52 MRO- Tek Ltd 5.17 1.74 -66.34

53 ICI India Ltd 109.72 77.38 -29.48



56 Reliance Energy Ltd 46.04 47.03 2.15



59 Great Offshore Ltd 51.09 53.21 4.15

60 Mastek Ltd 35.92 35.56 -1.00

134

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-

Back

%

Diff.

61 SRF Ltd 20.44 51.14 150.20



64 Gujarat Fluorochemicals Ltd 27.64 30.42 10.06







71 ANG Auto Ltd -12.82 5.78 145.09

72 DLF Ltd 15.1 4.51 -70.13



75 L K P Finance Ltd 66.73 14.69 -77.99


77 Monnet Ispat Ltd 34.62 51.5 48.76

78 FDC Ltd 3.43 7.99 132.94



81 Avantel Ltd 4.91 2.63 -46.44


% Difference = % Difference between EPS before and after buy-back

EPS measures the profit available to shareholders per share and a comparison

between earnings per share before and after buy-back highlights the return to

the shareholders.

As observed in Table 10, there was a rise in EPS of 58 companies after

buy-backs. It is significant to note that in 11 cases, EPS increased by more than

200% and 5 cases reported a rise in EPS of more than 500%. However, 24

cases recorded a decline in EPS. The decline in EPS of 10 cases was more than

135

50% as compared to EPS before buy-back. The companies which were hard hit

included companies from computer hardware, telecom cables and equipments,

broadcasting, real estate industries etc. which announced buy-back during

subprime global crisis.

5.2.5. Book Value

Table 11

Book Value

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-Back

%

Diff.



3 Raymonds Ltd 107.62 145.85 35.52




7 Siemens Ltd 95.46 148.18 55.23



10 Bombay Dyeing And Manufacturing Co. Ltd 160.18 90.59 -43.44

11 Britannia Industries Ltd 86.22 151 75.13

12 OCL India Ltd 200.93 194.51 -3.20


14 Exide Industries Ltd 74.64 47.03 -36.99




18 Hindalco Industries Ltd 615.25 669.44 8.81

19 Blue Star Ltd 57.72 72.37 25.38





136

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-Back

%

Diff.


25 Venky’s (India) Ltd 71.88 92.58 28.80










35 Mazda Ltd 18.05 27.04 49.81



38 Mastek Ltd 92.38 72.04 -22.02

39 Avery India Ltd 30.74 37.91 23.32



42 DIL Ltd 297.97 306.55 2.88





47 SRF Ltd 83.03 134.56 62.06

48 Natco Pharma Ltd 54.35 91.97 69.22




52 MRO- Tek Ltd 44.44 49.49 11.36

53 ICI India Ltd 212.42 254.69 19.90


137

Sr.

No. Name of Company

Before

Buy-

Back

After

Buy-Back

%

Diff.


56 Reliance Energy Ltd 435.51 574.81 31.99




60 Mastek Ltd 105.57 130 23.14

61 SRF Ltd 134.56 200.24 48.81



64 Gujarat Fluorochemicals Ltd 85.57 139.13 62.59



67 Surana Telecom and Power Ltd 32.18 33.06 2.73



70 E.I.D.Parry (India) Ltd 56.72 126.29 122.66

71 ANG Auto Ltd 67.36 69.14 2.64

72 DLF Ltd 66.1 75.59 14.36



75 L K P Finance Ltd 95.53 105.99 10.95


77 Monnet Ispat Ltd 222.5 311.06 39.80

78 FDC Ltd 19.55 28.14 43.94



81 Avantel Ltd 30.26 33.7 11.37


Book value per share is calculated by subtracting liabilities and the par value of

any outstanding preferred stock from assets and dividing the remainder by the

138

number of outstanding shares of stock. It is fundamental value per share which

is not dictated by the demand and supply of shares. An increase in book value

highlights increase in shareholders’ wealth.

It is found in Table 11 that in 66 cases of buy-backs the book value of

companies increased after buy-back. In 4 cases, the increase in book value was

more than 100% and in 17 cases the increase in book value ranged between 25

to 50%. However, there was a decline in the book value after buy-back in 16

cases and the decline ranged between 0 to (-25%).

Thus we can conclude that in more than 55% of the companies the overall

performance of the companies improved after buy-back.

5.2.6 Industry-Wise Performance

Industry-wise performance of companies that completed buy-back is as

follows:-

A - Agriculture, Forestry and Fishing

The results of Ambuja Exports Ltd were discouraging after buy-back. There

was a decline in the net profit ratio, return on net worth, current ratio and

earnings per share after buy-back.

B -Mining and Quarrying

This industry depicted a mixed trend. Of the multiple buy-backs by Selan

Exploration Technologies Ltd, during the first two buy-backs the results were

not only positive but were promising to the extent of a rise in net profit ratio

and return on net worth by more than 250%. However, the results of other two

buy-backs were discouraging.

C -Manufacturing

1. Packaged foods, and food packaging

The results of this industry one year after buy-back were positive in four out of

five programmes including 3 multiple buy-backs by Britannia Industries Ltd.

The increase in net profit ratio, current ratio, earnings per share and book value

depicted a positive trend. Though there was a decline in return on net worth

139

ratio in case of Britannia Industries Ltd the overall performance of the

company after buy-back was satisfactory.

2. Beverages

Jayshree Tea and Industries Ltd was the only company under this industry

which offered buy-back of shares. The company recorded a rise in net profit

ratio, return on net worth and earnings per share of more than 600% and

performed well after buy-back. Though there was a decline in current ratio

from 4.16 to 2.16, the company’s the overall performance after buy-back was

satisfactory.

3. Sugar

This industry performed well after buy-back as E.I.D.Parry (India) Ltd

recorded a rise of 802.38% in net profit margin, 678.37% in return on net

worth, and 1377.96% in earnings per share.

4. Textiles

Except for Winsome Yarns Ltd and Reliance Industries Ltd, all the companies

performed well after buy-back as seen in the increase in net profit ratio, net

worth ratio and earnings per share. The current ratios of the companies

declined after buy-back, but there was an increase in book value of all the

companies in this industry.

5. Plastics

The net profit ratio of Finolex Industries Ltd declined after buy-back in only

one of the two buy-backs. However, the overall performance as noticed in

return on net worth, current ratio, earnings per share and book value of the

industry as a whole was encouraging.

6. Personal Products

Except for Hindustan Unilever Ltd, there was a rise in net profit ratios in all

buy-backs which included seven buy-backs by Godrej Consumer Products Ltd.

However, the earnings per share in case of all buy-backs increased except in

140

case of one buy-back by Godrej Consumer Products Ltd. The overall

performance inspite of multiple buy-backs was favourable.

7. Commodity Chemicals

This industry registered a positive performance by both the companies after

buy-back and in case of Godrej Industries Ltd there was a rise of more than

300% in net profit and earnings per share. There was a rise in the return on net

worth and book value of shares after buy-back.

8. Industrial Gases

The results of Gujarat Flourochemicals Ltd in this industry were discouraging.

The companies did not perform well after buy-back. There was a decline in the

net profit ratio and return on net worth by (-23.70%) and (-32.31%)

respectively after buy-back.

9. Paints and Varnishes

ICI India Ltd under this industry recorded a decline in net profit margin

(-35.64%), return on net worth (-41.17%) and earnings per share (-29.48%)

after buy-back, Hence the results of this industry were discouraging.

10. Pharmaceuticals

A mixed trend is noticed in this industry. While Sun Pharmaceuticals Ltd

registered a decline of (-98.97%) in net profit, (-16.82%) in return on net worth

and (-33.63%) in earnings per share, the net profit ratio of DIL Ltd increased

by 950.31%. The performance of other companies under this industry was also

positive. There was an increase in book value and the current ratio was

satisfactory.

11. Iron and Steel and Intermediate Products

Monnet Ispat Ltd the only company under this industry performed well. There

was an increase of 26.71% in net profit ratio, 6.55% increase in return on net

worth and 48.76% increase in earnings per share. The current ratio and book

value too were favourable.

141

12. Consumer Electronics

Only Blue Star Ltd went for buy-back. It reported a decline of

(-13.9%) in net profit ratio year after buy-back, but the return on net worth

ratio increased by 27.29%, earnings per share increased by 27.29% and book

value increased by 25.38%.

13. Heavy Electricals and Electrical Utilities

The companies in this industry exhibited a mixed performance. While the

performance of Siemens Ltd was good with an increase of 64.76% in net profit,

32.55% rise in return on net worth, 105.77% increase in earnings per share and

55.23% increase in book value, ECE Industries Ltd recorded a decline of

(-83.68%) in net profit margin, (-84.11%) in return on net worth and

(-83.59%) in earnings per share.

14. Engineering, Industrial Machinery and Allied Products

Except Hindalco Industries Ltd all the companies in this industry except

Hindalco Industries Ltd performed well after buy-back and their financial

results were positive. G Dandekar Machine Works Ltd and Mazda Ltd recorded

an increase of 193.94% and 216.36% respectively in earnings per share. The

current ratios were favourable. The earnings per share and book value were

also positive.

15. Auto Parts

Exide Industries Ltd performed well and recorded an increase of 87.26% in net

profit ratio, 98.87% rise in return on net worth, and 16.38% rise in earnings per

share. However, ANG Auto Ltd registered a decline of (-42.92%) in net profit,

and (-11.0%) in return on net worth. The current ratio in both the cases was

favourable.

16. Diamond Cutting and Precious Metal Jewellery

Goldiam International Ltd was the only company in this industry that went for

buy-back and it performed extra-ordinarily well after buy-back.

142

17. Diversified

Under this industry Kesoram Industries Ltd undertook two buy-back

programmes and recorded a rise of 8.09% in net profit ratio in the first

buy-back and decline of (-94.94%) in net profit ratio in other buy-back by the

company. However, the return on net worth ratio and earnings per share

declined in the first buy-back by (-34.72%) and (-28.80%) respectively after

the first buy-back and there was an increase in return on net worth (6.98%) and

earnings per share (19.58%) after the second buy-back .

18. Cement and Cement Products

This industry registered mixed results. While the percentage increase in the net

profit, return on net worth and earnings per share of OCL India Ltd and Rain

Commodities Ltd was more than 150%, the performance of Madras Cement

Ltd was not satisfactory after buy-back.

D -Electricity, Gas Steam, and Air Conditioning Supply

The percentage difference in the net profit ratios, return on net worth ratios of

Reliance Energy Ltd and Reliance Infra Ltd in the industry declined year after

buy-back, the current ratio after buy-back was 1.73 and there was an increase

in book value of the company of more than 23%.

F – Construction and Real Estate Activities

DLF Ltd in this industry did not perform well after the buy-back. The net profit

ratio, return on net worth ratio and earnings per share declined more than

(-40%) year after buy-back, but the current ratio after buy-back was positive.

H -Transportation and Storage and Shipping

The overall performance of this industry was satisfactory. The financial ratios

of Great Eastern Shipping Ltd after buy-back in both buy-back cases were

positive. There was a decline in net profit ratios of Great Offshore Ltd by

143

(-21.53%) and a marginal decrease of (-0.52%) in return on net worth ratio of

Gateway Distriparks Ltd.

J - Information and Communication

1. Computer Software Production

A mixed trend was noticed in this industry. Mastek Ltd in the first buy-back

and Ace Software Exports Ltd (in the second buy-back) registered a gain of

23.09% and 91.99% in net profit respectively after buy-back and a marginal

decline of less than (-10%) in net profit ratios was noticed in Ace Software Ltd,

(in the first buy-back), Mastek Ltd (in the second buy-back) and Patni

Computer System Ltd. However, except for Mastek Ltd (in the second

buy-back) all the companies in this industry registered a rise in earnings per

share after buy-back.

2. IT Consulting and Software

In this industry while the net profit ratio, the return on net worth, earnings per

share of GSS America Infotech Ltd declined by more than (-50%) these ratios

increased by more than 150% in case of Sasken Communications and

Technologies Ltd. The book value increased by 10% of both the companies.

3. Computer Hardware

The performance of the MRO Tek Ltd the only company who went for

buy-back in this industry was discouraging as there was a decline in net profit

margin ratio and return on net worth of (-72.25%) and (-69.73%) respectively.

4. Telecom Cables and Equipments

The financial ratios of companies in this industry were disappointing and the

net profit ratios, the return on net worth ratios and earnings per share of all the

three companies declined by more than (-35%).

144

K- Information and Communication and Broadcasting and Cable T V

T V Today Network Ltd the only company in this industry which went for

buy-back did not perform well after buy-back and the net profit ratio, return on

net worth and earnings per share ratios were negative.

L –Financial and Insurance Activities

In this industry the net profit ratios and return on net worth of two companies

were negative, but Indiabulls Financial Services Ltd recorded a rise of 5.59% in

net profit, 88.38% in return on net worth and 511.95% increase in earnings per

share and 143.15% rise in book value year after buy-back.

Industry-wise analysis reveals that manufacturing industries as packaged food,

food products beverages, sugar, textiles, plastics, personal products,

commodity chemicals, pharmaceuticals, iron and steel, consumer electronics,

engineering, industrial machinery and aluminum, diamond cutting,

transportation and storage and financial services and insurance performed well

after buy-back. However, the companies which did not perform well include

agriculture, forestry and fishing, exploration, industrial gases, paints and

varnishes, cement, construction and real estate, and auto industries,

information and communication software, hardware companies, telecom cables

and equipments, and broadcasting and cable T.V.

Though the performance of majority companies was positive and promising we

cannot generalize that buy-back results in an increase in operating efficiency.

The profits or fortunes of companies may improve or deteriorate from time to

time due to a great variety of factors, such as company specific factors as

business risks and external factors, like cyclical factors, competition,

government policies, global subprime crisis etc. Besides, there are companies

which brought in financial changes as double buy-back, issue of bonus shares,

rights issue, etc after buy-back which also affects the performance of the

companies. Share buyback is nothing more than a relatively minor kind of

financial engineering and cannot provide immunity to the company against the

fundamental economic forces.

145

Buy-back of shares and effect on shareholders’ wealth

Gain to the shareholders can be measured at two stages, i.e. gain to those who

have participated in buy-back and tendered shares in the buy-back process and

gain to those who have not participated and retained shares after buy-back. An

attempt is made to find whether the shareholders’ wealth increased or not due

to buy-back in both the cases.

5.3.1 Difference between Offer Price and Actual Price paid

Offer price of shares is the maximum price at which the company agrees to

buy-back its own shares from open market during buy-back process. But, it is

at the discretion of the company management to decide at what price, on which

days and in what quantity the company will repurchase its shares. The

companies are at liberty to end the buy-back programme or discontinue it

before the end date and even before the total aggregate amount are reached.

Nevertheless, according to Section 77A (9), such particulars are required to be

entered in the register of buy-back of securities within 7 days of the date of

completion of buy-back.

A comparison between offer price and actual price of share offered for

buy-back is exhibited in Table 12 which is as follows:

146

Table 12

Mean Share Prices before buy-back, Share Prices on Announcement Date, Offer Price and Actual Price paid

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `

1 Selan Exploration Technologies Ltd. 13.26 14 20 10.99 42.86 -45.05 50.83

2 Great Eastern Shipping Ltd 34.84 35.02 42 34.91 19.93 -16.88 20.55

3 Raymonds Ltd 139.14 135.5 160 135 18.08 -15.63 14.99

4 Selan Exploration Technologies Ltd. 11.13 11.5 25 11.65 117.39 -53.40 124.62

5 Finolex Industries Ltd 19.11 21.15 40 27.73 89.13 -30.68 109.31

6 Jayshree Tea and Industries Ltd 60.08 58.8 75 51.2 27.55 -31.73 24.83

7 Siemens Ltd 197.03 204.8 250 197.49 22.07 -21.00 26.88

8 Winsome Yarns Ltd 6.29 6.8 10 7.01 47.06 -29.90 58.98

9 Great Eastern Shipping Ltd 29.2 28.35 42 28.27 48.15 -32.69 43.84

10 Bombay Dyeing And Manufacturing Co. Ltd 40.24 40.5 60 40.7 48.15 -32.17 49.11

11 Britannia Industries Ltd 555.74 559.8 750 533.15 33.98 -28.91 34.96

12 OCL India Ltd 49.01 51.5 80 57 55.34 -28.75 63.23

147

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `

13 Kesoram Industries Ltd 22.17 22.9 40 26.61 74.67 -33.48 80.42

14 Exide Industries Ltd 57.5 57.2 70 66.56 22.38 -4.91 21.74

15 Godrej Consumer Products Ltd 55.53 56.75 100 17.77 76.21 -82.23 80.08

16 Heritage Food (India) Ltd (16) 23.22 19.9 30 27.62 50.75 -7.93 29.20

17 G G Dandekar Machine Works 161.23 164 250 245.15 52.44 -1.94 55.06

18 Hindalco Industries Ltd 715.9 692.95 825 734.79 19.06 -10.93 15.24

19 Blue Star Ltd 55.02 56.85 75 65.4 31.93 -12.80 36.31


21 Winsome Yarns Ltd 6.39 6.95 10 8.25 43.88 -17.50 56.49

22 Finolex Industries Ltd 31.53 32.75 40 34.24 22.14 -14.40 26.86



25 Venky’s (India) Ltd 46.38 46.55 65 50.61 39.63 -22.14 40.15

26 Solitaire Machines Tools Ltd 2.98 4 8 4.8418 100.00 -39.48 168.46

27 Bombay Dyeing And Manufacturing Co. Ltd 42.18 42.25 65 46.54 53.85 -28.40 54.10

148

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `

28 Sun Pharmaceuticals Ltd 600.68 603.05 750 274.71 24.37 -63.37 24.86


30 Kesoram Industries Ltd 26.89 30.05 40 32.39 33.11 -19.03 48.75

31 ECE Industries Ltd 28.13 28 30 30 7.14 0.00 6.65

32 Ace Software Exports Ltd 8.09 8.2 10 9.47 21.95 -5.30 23.61

33 Fine- Line Circuits Ltd 3.83 4.1 6.5 5.66 58.54 -12.92 69.71


35 Mazda Ltd 8.92 8.5 10 8.91 17.65 -10.90 12.11


37 Godrej Consumer Products Ltd 176.42 182 200 197.92 9.89 -1.04 13.37

38 Mastek Ltd 245.25 201.85 320 273.35 58.53 -14.58 30.48

39 Avery India Ltd 35.57 40 35 35 -12.50 0.00 -1.60


41 Reliance Industries Ltd 530.39 528.1 570 521.38 7.93 -8.53 7.47

42 DIL Ltd 200.89 223.6 250 246.87 11.81 -1.25 24.45

149

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `


44 Glaxo Smithkline Pharmaceuticals Ltd 725.62 713.05 800 795.9 12.19 -0.51 10.25

45 Indiabulls Financial Services Ltd 162.88 168.55 210 208 24.59 -0.95 28.93

46 Prime Securities Ltd 62.74 69.9 101 63.52 44.49 -37.11 60.98

47 SRF Ltd 199.94 214.35 250 197.2 16.63 -21.12 25.04

48 Natco Pharma Ltd 112.33 155.55 150 140.36 -3.57 -6.43 33.54

49 Revathi Equipments Ltd 662.68 659.85 700 673.04 6.08 -3.85 5.63

50 Gujarat Ambuja Exports Ltd 28.48 30.1 38 34.26 26.25 -9.84 33.43

51 Ace Software Exports Ltd 16.08 16.35 20 16.91 22.32 -15.45 24.38

52 MRO- Tek Ltd 46.59 49.05 55 46.99 12.13 -14.56 18.05

53 ICI India Ltd 502.62 516.85 575 524.323 11.25 -8.81 14.40

54 Hindustan Unilever Ltd 220.07 227.05 230 207 1.30 -10.00 4.51

55 Madras Cements Ltd 3685.86 3409.4 4200 3592 23.19 -14.48 13.95

56 Reliance Energy Ltd 1365.69 1270 1600 908.14 25.98 -43.24 17.16

57 Reliance Infra Ltd 526.55 550 700 509.54 27.27 -27.21 32.94

150

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `

58 Goldiam International Ltd 57.33 57.45 75 39.88 30.55 -46.83 30.82

59 Great Offshore Ltd 665.78 666.15 750 564.26 12.59 -24.77 12.65

60 Mastek Ltd 371.48 382.2 750 391.55 96.23 -47.79 101.90

61 SRF Ltd 122.81 115.5 160 94.82 38.53 -40.74 30.28

62 Patni Computers Ltd 226.22 237.25 325 216.3 36.99 -33.45 43.67

63 Gateway Distriparks Ltd 90.92 86.75 110 81.18 26.80 -26.20 20.99

64 Gujarat Fluorochemicals Ltd 191.55 193.75 300 103.48 54.84 -65.51 56.62

65 Sasken Communications Technologies Ltd 139.47 139.1 260 106.8 86.92 -58.92 86.42

66 Rain Commodities Ltd 193.01 181.5 307 149.66 69.15 -51.25 59.06

67 Surana Telecom and Power Ltd 28.85 28.25 50 24.69 76.99 -50.62 73.31


69 Supreme Industries Ltd 106.2 101.15 125 110.86 23.58 -11.31 17.70

70 E.I.D.Parry (India) Ltd 141.27 165.1 160 141.18 -3.09 -11.76 13.26

71 ANG Auto Ltd 75.69 81.3 215 52.23 164.45 -75.71 184.05

72 DLF Ltd 311.37 301.65 600 184.19 98.91 -69.30 92.70

151

Sr.


Mean

Share

Price

B.B.B

Price

on

A.D

Offer

price

O.P

Actual

Price

A.P

%Diff

(O.P-

A.D)/

A.Dx100

% Diff

(O.P-

A.P)/

O.Px100

%Diff

(O.P-

M.P)/

M.Px100

` ` ` `

73 GSS America Infotech Ltd 124.51 124.85 250 152.27 100.24 -39.09 100.79

74 Jindal Poly Films Ltd 147.58 142.9 350 270 144.93 -22.86 137.16

75 L K P Finance Ltd 59.37 60.9 90 77.65 47.78 -13.72 51.59

76 Mangalam Cement Ltd 48.66 51.25 75 72.03 46.34 -3.96 54.13

77 Monnet Ispat Ltd 128.2 136.75 300 141.25 119.38 -52.92 134.01

78 FDC Ltd 25.1 25.05 40 34.31 59.68 -14.23 59.36

79 T V Today Network Ltd 56.18 56.8 115 80.52 102.46 -29.98 104.70

80 Valiant Communications Ltd 22.31 23.8 32 23.62 34.45 -26.19 43.43

81 Avantel Ltd 43.06 41.2 50 49.05 21.36 -1.90 16.12

82 Godrej Industries Ltd 106.06 93.9 275 134.41 192.86 -51.12 159.29

Mean Share Price B.B.B = Mean share price 10 days before buy-back

A.D = Announcement Date

O.P = Offer Price

A.P = Actual Price paid

152

Table 12 highlights that there is a difference of more than 25% between offer

price and actual price paid by the companies. It is evident that in majority of

buy-backs the offer price was more than 25% of the mean share price 10 days

before the opening of the buy-back offer and in case of 12 companies

i.e.14.63% of companies, offer price was more than 100% of the mean share

price 10 days before buy-back. Thus the offer price seemed more attractive,

alluring the shareholders to tender their share during the process of buy-back.

However, a comparison between the maximum offer price and the actual price

paid for the share buy-back shows that the actual price paid was less than 50%

of maximum offer price in case of 12 companies, i.e. 14.84% companies and

was less than 25% of maximum offer price in case of 37 companies i.e. 45%

companies. Thus, it is evident that the shareholders due to lack of minimum

price stood to lose in the buy-back process.

5.3.2 Share Prices on announcement date, opening of the offer date,

closure of the offer date and one month after the closure of the offer date.

The wealth of the shareholders with respect to the buy-back event can also be

examined by comparing the share prices on announcement date (A.D), opening

of the offer date (O.D), closure of the offer date (C.D) and one month after the

closure. Table 13 shows the prices of shares on announcement date (A.D),

opening of the offer date (O.D), on closing of the offer date (C.D) and one

month after the closure.

153

Table 13

Prices of shares on Announcement, Opening of offer, Closure of offer and One month after closure date

A.D O.D C.D

One

Month

Later Sr.

No. Name of Companies

`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

1 Selan Exploration Technologies Ltd. 14 14.4 14.2 12 2.86 -1.39 -15.49 -14.29

2 Great Eastern Shipping Ltd 35.02 34.11 27.55 31.7 -2.60 -19.23 15.06 -9.48

3 Raymonds Ltd 135.5 141.5 106.4 103.8 4.43 -24.81 -2.44 -23.39

4 Selan Exploration Technologies Ltd. 11.5 11.65 10.3 8 1.30 -11.59 -22.33 -30.43

5 Finolex Industries Ltd 21.15 22.8 26 29.55 7.80 14.04 13.65 39.72

6 Jayshree Tea and Industries Ltd 58.8 59.1 43.75 41.5 0.51 -25.97 -5.14 -29.42

7 Siemens Ltd 204.8 202.3 311.3 320 -1.22 53.88 2.79 56.25

8 Winsome Yarns Ltd 6.8 6.95 6.75 6.35 2.21 -2.88 -5.93 -6.62

9 Great Eastern Shipping Ltd 28.35 29.9 30.4 28.7 5.47 1.67 -5.59 1.23

10 Bombay Dyeing And Manufacturing Co. Ltd 40.5 41.15 52.65 50.25 1.60 27.95 -4.56 24.07

11 Britannia Industries Ltd 559.8 560 566 581.5 0.04 1.07 2.74 3.88

12 OCL India Ltd 51.5 50.3 60 50.5 -2.33 19.28 -15.83 -1.94

13 Kesoram Industries Ltd 22.9 23.35 32.9 26.25 1.97 40.90 -20.21 14.63

154

A.D O.D C.D

One

Month

Later Sr.


`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

14 Exide Industries Ltd 57.2 57.75 89.8 90.4 0.96 55.50 0.67 58.04

15 Godrej Consumer Products Ltd 56.75 57.7 75.95 89.15 1.67 31.63 17.38 57.09

16 Heritage Food (India) Ltd (16) 19.9 22.75 27.5 28.55 14.32 20.88 3.82 43.47

17 G G Dandekar Machine Works 164 200 260 171 21.95 30.00 -34.23 4.27

18 Hindalco Industries Ltd 692.95 729.6 589.25 591.05 5.29 -19.24 0.31 -14.71

19 Blue Star Ltd 56.85 59.15 75 80.4 4.05 26.80 7.20 41.42

20 Selan Exploration Technologies Ltd. 10.85 11.6 8.9 8.4 6.91 -23.28 -5.62 -22.58

21 Winsome Yarns Ltd 6.95 6.25 8.65 7 -10.07 38.40 -19.08 0.72

22 Finolex Industries Ltd 32.75 32.5 46.9 54.7 -0.76 44.31 16.63 67.02

23 Godrej Consumer Products Ltd 101.3 100.2 110.45 105.5 -1.09 10.23 -4.48 4.15

24 Britannia Industries Ltd 539.05 542.5 527.8 535.15 0.64 -2.71 1.39 -0.72

25 Venky’s (India) Ltd 46.55 46.3 53 56.65 -0.54 14.47 6.89 21.70

26 Solitaire Machines Tools Ltd 4 4.45 3.1 3.5 11.25 -30.34 12.90 -12.50

27 Bombay Dyeing And Manufacturing Co. Ltd 42.25 43.55 64.9 78.65 3.08 49.02 21.19 86.15

28 Sun Pharmaceuticals Ltd 603.05 599.55 510.45 578.2 -0.58 -14.86 13.27 -4.12

155

A.D O.D C.D

One

Month

Later Sr.


`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

29 Godrej Consumer Products Ltd 102.2 101.15 142.45 145.6 -1.03 40.83 2.21 42.47

30 Kesoram Industries Ltd 30.05 25.9 47.05 47.7 -13.81 81.66 1.38 58.74

31 ECE Industries Ltd 28 28.1 46.1 55.3 0.36 64.06 19.96 97.50

32 Ace Software Exports Ltd 8.2 8.4 10.07 10.45 2.44 19.88 3.77 27.44

33 Fine- Line Circuits Ltd 4.1 4.25 4.6 3.25 3.66 8.24 -29.35 -20.73

34 Selan Exploration Technologies Ltd. 9.45 10.05 20.05 14.5 6.35 99.50 -27.68 53.44

35 Mazda Ltd 8.5 9.4 9.25 12.4 10.59 -1.60 34.05 45.88

36 Godrej Consumer Products Ltd 143.05 142.7 163.65 186.65 -0.24 14.68 14.05 30.48

37 Godrej Consumer Products Ltd 182 195.5 207.15 245 7.42 5.96 18.27 34.62

38 Mastek Ltd 201.85 269 348.4 376.35 33.27 29.52 8.02 86.45

39 Avery India Ltd 40 35.1 45.25 39 -12.25 28.92 -13.81 -2.50

40 Britannia Industries Ltd 601.15 609.9 619.2 671.85 1.46 1.52 8.50 11.76

41 Reliance Industries Ltd 528.1 533.5 725.75 730.6 1.02 36.04 0.67 38.35

42 DIL Ltd 223.6 206 315.2 382.75 -7.87 53.01 21.43 71.18


156

A.D O.D C.D

One

Month

Later Sr.


`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

44 Glaxo Smithkline Pharmaceuticals Ltd 713.05 742.4 1107.15 1193.65 4.12 49.13 7.81 67.40

45 Indiabulls Financial Services Ltd 168.55 160.3 187.9 207.55 -4.89 17.22 10.46 23.14

46 Prime Securities Ltd 69.9 61.4 56.35 59.55 -12.16 -8.22 5.68 -14.81

47 SRF Ltd 214.35 199.6 232.75 239.15 -6.88 16.61 2.75 11.57

48 Natco Pharma Ltd 155.55 147.4 119.75 109.3 -5.24 -18.76 -8.73 -29.73

49 Revathi Equipments Ltd 659.85 680.6 801.15 806.1 3.14 17.71 0.62 22.16

50 Gujarat Ambuja Exports Ltd 30.1 30.1 83.45 63.25 0.00 177.24 -24.21 110.13

51 Ace Software Exports Ltd 16.35 16.45 18.4 14.9 0.61 11.85 -19.02 -8.87

52 MRO- Tek Ltd 49.05 46.2 43.4 54.1 -5.81 -6.06 24.65 10.30

53 ICI India Ltd 516.85 525.85 525 500.3 1.74 -0.16 -4.70 -3.20

54 Hindustan Unilever Ltd 227.05 220.35 207.8 231.8 -2.95 -5.70 11.55 2.09

55 Madras Cements Ltd 3409.4 3639.55 3237.45 3100.35 6.75 -11.05 -4.23 -9.06

56 Reliance Energy Ltd 1270 1190.8 520.35 457.6 -6.24 -56.30 -12.06 -63.97

57 Reliance Infra Ltd 550 506.75 653.15 769.15 -7.86 28.89 17.76 39.85

58 Goldiam International Ltd 57.45 58.95 20.35 20.35 2.61 -65.48 0.00 -64.58

157

A.D O.D C.D

One

Month

Later Sr.


`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

59 Great Offshore Ltd 666.15 674.7 483.05 483.05 1.28 -28.41 0.00 -27.49

60 Mastek Ltd 382.2 397.55 357.35 357.35 4.02 -10.11 0.00 -6.50

61 SRF Ltd 115.5 118.3 84.45 120.8 2.42 -28.61 43.04 4.59

62 Patni Computers Ltd 237.25 246.8 142.45 142.55 4.03 -42.28 0.07 -39.92

63 Gateway Distriparks Ltd 86.75 96.45 71.45 45.95 11.18 -25.92 -35.69 -47.03

64 Gujarat Fluorochemicals Ltd 193.75 199.75 68.65 83.7 3.10 -65.63 21.92 -56.80

65 Sasken Communications Technologies Ltd 139.1 130.45 69.75 52.05 -6.22 -46.53 -25.38 -62.58

66 Rain Commodities Ltd 181.5 201 86.6 95.45 10.74 -56.92 10.22 -47.41

67 Surana Telecom and Power Ltd 28.25 28.2 17.7 16.45 -0.18 -37.23 -7.06 -41.77


69 Supreme Industries Ltd 101.15 112.2 113.3 98.75 10.92 0.98 -12.84 -2.37

70 E.I.D.Parry (India) Ltd 165.1 155.7 131.05 147.5 -5.69 -15.83 12.55 -10.66

71 ANG Auto Ltd 81.3 81.8 56.1 29.65 0.62 -31.42 -47.15 -63.53

72 DLF Ltd 301.65 291.3 233.75 416.15 -3.43 -19.76 78.03 37.96

73 GSS America Infotech Ltd 124.85 125.15 177.35 249.3 0.24 41.71 40.57 99.68

158

A.D O.D C.D

One

Month

Later Sr.


`̀̀̀ `̀̀̀ `̀̀̀ `̀̀̀

%

Diff.

(OD-

AD)

%

Diff.

(CD-

OD)

%Diff.

(1Month

Later-

CD)

%Diff.

(1Month

Later-

AD)

74 Jindal Poly Films Ltd 142.9 150.55 256.15 310.6 5.35 70.14 21.26 117.35

75 L K P Finance Ltd 60.9 56.25 83.7 90 -7.64 48.80 7.53 47.78

76 Mangalam Cement Ltd 51.25 51.45 142.2 130.45 0.39 176.38 -8.26 154.54

77 Monnet Ispat Ltd 136.75 124.55 254.5 234 -8.92 104.34 -8.06 71.12

78 FDC Ltd 25.05 26.7 42.65 48.15 6.59 59.74 12.90 92.22

79 T V Today Network Ltd 56.8 72.8 89.75 97.65 28.17 23.28 8.80 71.92

80 Valiant Communications Ltd 23.8 21 27.15 27.2 -11.76 29.29 0.18 14.29

81 Avantel Ltd 41.2 47.3 48.75 57.95 14.81 3.07 18.87 40.66

82 Godrej Industries Ltd 93.9 132.75 139.15 163.7 41.37 4.82 17.64 74.33

A.D=Announcement Date % Diff (O.D-A.D) = [(O.D-A.D)/A.D] x 100

O.D=Opening of offer Date %Diff (C.D-O.D)= [(C.D-O.D)/O.D] x 100

C.D=Closure of offer Date % Diff. (1 Month Later –C.D) = [(1 Month Later-C.D)/C.D] x100

Later=One month Later Date % Diff.( 1 Month Later –A.D) = [(1 Month Later-A.D)/A.D] x100

159

An overall mixed effect of buy-back of shares on share prices is noticed as is

evident in the Table 13.

A. As observed in the Table 13, the announcement of buy-back resulted in an

increase in share prices in case of 53 companies i.e. 64.63%, from the date of

announcement date to the date of opening of the offer, whereas it declined in

case of 29 companies i.e.35.37% after announcement. Except for three

companies Mastek Ltd, TV Today Network Ltd and Godrej Industries Ltd the

share prices increased more than 25%; The announcement effect ranged

between (-25%) to (+25%).

B. The declining trend in share prices further extended during the buy-back

period i.e. opening of the offer and closing of the offer dates. In as many as 32

companies (39.02%) the prices on closing date declined as compared to share

prices on the offer date and the decline was less than 25% in case of 14

companies as compared to the prices on the offer date. However, in case of

other 22 companies, prices reacted positively ranging between 0 to 25% and in

case of 3 companies it increased more than 100%. i.e. Gujarat Ambuja Exports

Ltd (177.24%), Mangalam Cement Ltd (176.38%) and Monnet Ispat Ltd

(104.34%)

C. The prices of shares one month post closure date exhibited a stable pattern.

It seemed that prices of companies which increased or declined more than 50%

during the buy-back phase, i.e. between the offer date and closing of the offer

date, moderately tended to range between (-25%) to (+25%) after buy-back

except in case of 6 companies- GG Dandekar Machines Ltd, Fine-Line Circuits

Ltd, Selan Exploration Techonologies Ltd Gateway Distriparks Ltd, Sasken

Communication Technologies Ltd and ANG Auto Ltd which declined more

than (-25%) in a short period of one month. In case of 4 companies the prices

increased more than (25%) i.e. Mazda Ltd (34.05%), SRF Ltd (43.04%) during

second buy-back, DLF Ltd (78.03%) and GSS America Infotech Ltd (40.57%).

D. Difference between the prices post closure of the offer and announcement

day reflected the same pattern. There were 19 companies which recorded a

difference between 0 to (-25%) and 16 companies which recorded an increase

160

between (0 to +25%). However, there were 3 cases- Gujarat Ambuja Exports

Ltd, Jindal Polyfilms Ltd and Mangalam Cement Ltd, where the increase in

share price one month post closure date as compared to announcement date was

more than 100% which benefited the shareholders who did not participate in

the buy-back offer. At the same time, the decline in case of 5 companies was

more than 50% i.e. Reliance Energy Ltd (-63.97%), Goldiam International Ltd

(-64%), Gujarat Flurochemicals Ltd (-56.80%), Sasken Communication

Techonologies Ltd (-62.58%), and ANG Auto Ltd (-63.53%), resulting in great

loss to shareholders who retained their shares.

Thus, on an average, shareholders of 35.36% of companies offering

buy-back suffered a setback after the completion of buy-back as compared to

64.63% of companies which gained after buy-back. All the same, it is difficult

to forecast whether there would be a rise or fall in the share prices after

buy-back.

5.3.3 Analysis of Mean Share Price and Earnings Per Share

The ultimate gain or loss to the shareholders can also be studied by analyzing

the difference in mean share prices after buy-back and before buy-back

together with a change in earnings per share before and after buy-back as

shown in Table 14.

Table 14

Difference in Mean Share Price and EPS

Difference in Mean share price and EPS No. of Cos. %

Both Positive 42 51.22

Both Negative 10 12.20

Prices Positive and EPS negative 13 15.85

Prices Negative and EPS Positive 17 20.73

Total 82 100

Thus, it is evident from the above Table 14 that among the shareholders who

did not tender their shares in the buy-back process, the shareholders of 42

161

companies (51.22%) stood to gain as the mean share prices after buy-back were

positive and the earnings per share a year after buy-back was also positive, but

the shareholders of 10 companies (12.20%) suffered loss as the mean share

prices after buy-back and even the earnings per share a year after buy-back

declined. The shareholders of 13 companies gained in the short run following

the buy-back in terms of share prices but there was a fall in the earnings per

share after one year. The shareholders of 17 companies did not gain in the short

run but measured in terms of earnings post one year the results were positive.

Nevertheless, only buy-back cannot be the sole factor to consider the effect on

EPS. Much depends on many other uncontrollable factors and the shareholders

may or may not have retained the shares of the companies in the long run.

Final thesis 25-08-2011 - INFLIBNETshodhganga.inflibnet.ac.in/bitstream/10603/3493/12/12_chapter...

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