7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 1/10

RATIONALE ANDEFFECT OF SHAREBUYBACK: R SYSTEMSINTERNATIONAL

By –

Pranjal Srivastava

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 2/10

WHAT IS SHARE BUY BACK?

A transaction a rm buys backshares of its ownstock.Decreases the s haresoutstanding.Increases EPS andalso t he st ock price.Stocks repurchasedare known asTreasury Stocks.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 3/10

DIFFERENT KINDS OF STOCKPURCHASES

Company hasexcessive ca sh – so t hesame i s d istributed toshareholders in termsof buyback ratherthen paying themdividends.To red uce d ilutioncaused by oftengenerous ESOP.

When the rm realises t hat i ts capi talstructure i s h eavily b urdened with equity, so

the company re duces the sam e by buyba ck.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 4/10

MAJOR EFFECTS OF STOCKREPURCHASE

Since t he ou tstandingshares are r educed :

EPS increases.

P/E ratio decreases

and increase a s perthe m arket scenario.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 5/10

ADVANTAGES OF BUYBACK

Viewed as a positsignal by investors.Stockholders haveoption either t o acceptthe offer or to a cceptthe d ividends,Eliminates a largechunk of shares,underrating prices.Can optimise theoverall WACC.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 6/10

DISADVANTAGES OF BUYBACK

Stockholders may p refercash dividends overbuyback, because ofregular ow.

Selling stockholdersmay n ot have al l theinformation about thecompany.

Repurchasing a t highprices c an bedisadvantageous toremaining stockholders.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 7/10

R SYSTEMS INTERNATIONAL

Was f ounded in 1993, is a specialized IT Servicesand Solutions rm.IT Services s pan over ve m ajor ver ticals –Telecom and Digital Media, Banking an dFinance, Healthcare, Manufacturing andLogistics and Government Services.Currently operates from 13 development centresspread across Asia Pacic, Europe a nd North

America.Quality p rocedures, delivery and operationalexcellence, customer – centric a pproach,intellectual capital and culture o f innovation.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 8/10

R SYSTEMS BUYBACK SNAPSHOT

R Systems announceda buyback of itsoutstanding shares o nDec 10, 2014.

Prices of the sh aresreached the h ighestthat of in the history.

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 9/10

R SYSTEMS BUYBACK SNAPSHOT

Total amount allottedfor BuyBack – Rs. 600lacs

Amount utilized tdate for buy-back – Rs12, 255, 892Max. no. of. Sharesproposed for Buy-back– 95, 00, 000Shares p urchased tilldate – 133, 977

7/21/2019 Rationale and Effect of Share Buyback

http://slidepdf.com/reader/full/rationale-and-effect-of-share-buyback 10/10

THANK YOU !!