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    Angeline Torillos - Assessment Task No. 2

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    Angeline Torillos
    The buyback ordinance issued by the Indian government in 1998 aimed to revive the capital markets and protect companies from hostile takeovers. It allowed companies to buy back shares from shareholders. While intended to increase buyback activity, MNCs showed little initial interest due to elaborate discourage regulations. By 2001-2002, depressed stock markets led 20 MNCs to increase their stakes in Indian subsidiaries through buybacks. Minority shareholders claimed MNCs misused buybacks and they had no choice but to sell to majority shareholders. SEBI needs stringent measures to safeguard small investors' interests during buybacks and resolve grievances over fair prices and delisting.

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    Angeline Torillos - Assessment Task No. 2

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    Angeline Torillos
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    The buyback ordinance issued by the Indian government in 1998 aimed to revive the capital markets and protect companies from hostile takeovers. It allowed companies to buy back shares from shareholders. While intended to increase buyback activity, MNCs showed little initial interest due to elaborate discourage regulations. By 2001-2002, depressed stock markets led 20 MNCs to increase their stakes in Indian subsidiaries through buybacks. Minority shareholders claimed MNCs misused buybacks and they had no choice but to sell to majority shareholders. SEBI needs stringent measures to safeguard small investors' interests during buybacks and resolve grievances over fair prices and delisting.

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    The buyback ordinance issued by the Indian government in 1998 aimed to revive the capital markets and protect companies from hostile takeovers. It allowed companies to buy back shares from shareholders. While intended to increase buyback activity, MNCs showed little initial interest due to elaborate discourage regulations. By 2001-2002, depressed stock markets led 20 MNCs to increase their stakes in Indian subsidiaries through buybacks. Minority shareholders claimed MNCs misused buybacks and they had no choice but to sell to majority shareholders. SEBI needs stringent measures to safeguard small investors' interests during buybacks and resolve grievances over fair prices and delisting.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    30 views2 pages

    Angeline Torillos - Assessment Task No. 2

    Uploaded by

    Angeline Torillos
    The buyback ordinance issued by the Indian government in 1998 aimed to revive the capital markets and protect companies from hostile takeovers. It allowed companies to buy back shares from shareholders. While intended to increase buyback activity, MNCs showed little initial interest due to elaborate discourage regulations. By 2001-2002, depressed stock markets led 20 MNCs to increase their stakes in Indian subsidiaries through buybacks. Minority shareholders claimed MNCs misused buybacks and they had no choice but to sell to majority shareholders. SEBI needs stringent measures to safeguard small investors' interests during buybacks and resolve grievances over fair prices and delisting.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    A.

    What were the objectives of the buyback ordinance issued by the Government
    of India in 1998? Describe the salient features of the buyback ordinance. Why did
    MNCs want to buy back the shares of their Indian ventures? Explain.

    The main objective of the buy back orders was to revive the capital markets and protect
    companies from hostile takeover bids and the buy back of shares was regulated by the
    securities and exchange board of india's buyback of securities regulation in 1998 and
    securities and exchange board of india's substantial acquisition of shares and takeover
    regulations in 1997 in other hand, this order did not lead to increased buy back activity by
    multinational organization. In the financial year 1999 to 2000 only six MNCs came out with
    buyback offers and in the year 2000 to 2001 only eight more companies offered to buy back
    shares. According to the analysis the low level of buy back activity in 1999 and 2000 could be
    attributed to the fact that buyback regulations were very elaborate and discouraging
    companies from using buy back options The lack of interest in buy back options may also be
    due to SEBI's restrictive regulations.

    B. The depressed stock markets in India are being utilized by several large MNCs to
    increase their stake in their Indian subsidiaries through the buyback of shares.
    Explain in detail the different methods of buyback available to an organization.

    The buy back provided by multinational corporations during the 2001 to 2002 financial year,
    twenty multinational corporations made tender offers and buy backs by the company usually
    indicate that management believed the stock was undervalued. This pushed the stock price
    up and closer to its inherent value. The buy back information letter sent the share price up to
    his 90 rupees even before the buyback offer was opened on 2000 November 13. The buy
    back provided that is why they gave share holders an exit option that compensated an
    exclusive over the stock price prior to the buyback but despite the fact that the benefits of
    share buy backs, some analysts and investors feel they are being abused by multinational
    corporations.

    C. According to minority shareholders, MNCs had misused the buyback option.


    Explain the various grievances of minority shareholders regarding the buyback of
    shares.

    Some investors observed that the government ordinance must have given them a choices
    However, minority shareholders claimed they had no choice and were forced to sell their
    stakes after the several nations bought back shares from the majority shareholders.

    D. Do you think stringent measures should be introduced to protect the interests of


    small investors? What should SEBI do to safeguard small investors’ interests and
    resolve their grievances?
    The dilemma facing small investors in India is whether a buyback option in line with SEBI
    policy actually protected their interests and gave them an exit option at a fair price, or whether
    large MNCs could and it was as it a means of not giving them the choices they could have?
    Full control over the subsidiary. Investors felt that the regulations drawn up by SEBI did not
    contain provisions to prevent the delisting of blue chip stocks. Additionally, the repurchase
    price determined using the parameters specified in the SEBI that took over the code did not
    take into account the future potential of the stock.

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