Buy Back

In October 2000, Royal Philips Electronics of Netherlands (Philips), the Dutch parent of Philips India Limited, announced its commencement ceremony purpose to redemption the shares of its Indian subsidiary. The open offer was initially made for 23% of the outstanding shares held by institutional investors, private bodies2 and the general public. The offer was made at Rs.105, a indemnification premium of 46% over the then prevailing live trade monetary value. With this, Philips became genius of the first multinational (MNCs) companies in India to offer buyback option to its shareholders. Soon after, the buyback option was offered by several(prenominal) multinational companies (MNCs) to increase their stake in their Indian ventures. any(prenominal) of these companies were Cadbury India, genus Otis Elevators, Carrier Aircon, Reckitt Benkiser etc. Fund managers which held these companies clove pinks felt that allowing buyback of shares was one of most favorable developme nts in the Indian stock markets. It provided a much needed exit option for shareholders in demoralise market conditions. Buyback by the company normally indicated that the caution felt that its stock was undervalued. This resulted in an increase in the price, convey it closer to the intrinsic value and providing investors with a high price for their investing in the company.

However, critics of the buyback option claimed that commodious multinationals had use the buyback option to repurchase the entire directionless stock from the market with the objective of delisting3 from the stock exchange and elimina ting an investment chance for investors. Mo! reover, most MNCs that offered buyback option reported a inculcate decline in the trading volumes of the shares of their Indian ventures. The declining liquid recite of these shares prompted critics to say that the Government of Indias attempt to revive capital markets by allowing buyback of shares had failed. The buyback ordinance was introduced by the Government of India (GOI) on October 31, 1998. The major objective of the...If you want to get a rich essay, order it on our website: OrderCustomPaper.com

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