Press Release
March 26, 2009
New Delhi
CNI Research undertakes a study on “Buyback and its effect on Investor Wealth”
Analyses the effect of Buyback and its effect on share prices of 22 companies who opted for buyback in 2008-09
CNI research Limited, the leading BSE listed research company that focuses on small & mid-caps, undertook a study on “Buyback of shares and its effect on investor wealth”, which was released today. More than 40,000 subscribers of CNI portal www.chamatcar.com will be able to access this study.
The CNI study analyses 22 companies which made buyback offers in 2008-09. These include Reliance Infra, Madras Cement, Sasken, SRF, GT Offshore, DLF, TTK Healthcare, Bosch, ANG Auto, Gujarat Flurocarbons, IPCA, EID Parry, etc.
History of buybacks in India sends mixed signals whether to participate in the buyback program or not. Going by the statistical data, CNI research found that the share price always declines abruptly after the announcement of buyback. From March 2008 till date, Sensex and Nifty have declined by around 43 percent. Those companies which started buyback in March & April of ‘08 saw a decline in share price of more than 60 percent.
“It is said that “depressed markets are not so bad after all” – at least for some companies and their promoters. It is the ripe time for the promoters to increase stake in their respective companies through the buyback route. The icing on the cake is, of course, that there is no outlay of the promoter’s personal funds as buybacks are funded by the companies themselves”, says Mr. Kishor Ostwal, CMD, CNI Research Ltd.
The buybacks are also gaining popularity amongst MNC’s and increasing number of them are opting for this route. Over all while there were only six buyback offers in 1999, the figure rose to eight in 2000, and jumped to over 22 in 2008-09.
CNI Research examined the price of all 22 scrips at the time of approval and today’s’ share price, and saw that the values depreciated by more than 50% in over half the companies studied.
The study throws open several questions and calls for the authorities to take cognizance of the issue of loss of investor wealth, especially retail investors and come out with regulations that look at safeguarding the interest of the retail investor.
CNI Research also feels that Buyback should be made a time bound programme which will really relate to the spirit of the law made for buybacks. The unlimited period of buyback without using the required cash set aside for such purpose at the time exhibits the motivated move of promoters to harm the interest of the minority shareholders.
The complete study can be accessed in the Special Feature section of www.chamatcar.com
About CNI
CNI Research Limited is a BSE Listed, leading Indian Research Company analysing and providing Data, Research Reports and Financial Information about Companies that are into the Small and Medium Cap category. CNI today has more than 40,000 subscribers from the retail Investors who rely on CNI for authentic and reliable information on Capital Markets to make their investment decisions. This information is provided to them online through their Financial Portal www.chamatcar.com .
CNI Research operates in the highly fragmented SME segment where information is hard to come by. Most of the research in India is done on large companies while there exists, practically no reliable information on smaller companies. CNI established in 2000 has successfully stepped into this void and established itself as a serious research house that sources hard to find data from these enterprises and does in-house research to come up with reports that are reliable and often predict the future happenings.
For more information, please contact:
Sunil Kumar Singh / Vinita Dhawan
Finesse PR
Telephones: +91-11-43046200 (30 lines)
Email: [email protected] / [email protected]
