Resorting to this excellent tool of financial re engineering as well as capital markets can be thus, regenerates company. However anomalies inconsistencies observed to set right to enable companies to buy-back shares. While share buy-back brings a lot of cheers to the capital market it as been observed by some analyses that buy-backs are made at the cost of hard assets and often companies are forced to sell of their hard assets to mobilize funds for share buy-back exercise. The placing of red carpet for the new market mantra; shares buy-back shall ensure that the companies resorting buy-back adopt good corporate practices so that introduction of the new provision does not result in any scam, in these regard SEBI has to pay a crucial >role in the regulation and guiding by buy-back shares in India.
Buy-back is a financial engineering technique which can be effective only if it is followed by a strong earnings flow over the short and long terms, which will lead to multiplication of share price, a higher EPS and a constant p/e ratio. Buy-back should only be attempted when the future earnings are forecasted to be strong and buoyant and the company can leverage its market capitalization through buy-back
It could be done for many reasons, like avoiding hostile take over, boasting EPS enhancing shareholders sentiment, utilizing surplus cash etc; it also shows company's focus on its core business and managements confidence of future earnings.


The buy-back facilitated both, long-term and short-term investors. Short-term investors can use this as an exit opportunity to cash in on the premium offered. Long-term investors are benefited by the future growth in the form of dividends and capital gains.

However, necessary steps should be taken to prevent any manipulation of the buy-Back process by the company and it should lead to a win-win for both the company and the investors.

INTRODUCTION

OBJECTIVES

A company may decide to buy back its shares for one of the following reasons:

• To return surplus cash to shareholders as an alternative to a higher dividend
payment or investing the surplus cash in existing or new operations.

• Adjust or change the company's capital structure quickly, say for those
companies seeking to increase its debt/equity ratio.

• To increase earnings per share and net asset value per share as a possible signal
to the market place that management its of the view that the prospects of the company justify a market price higher than the currently accorded by the market.'

• To improve the liquidity of the shares and other performance parameters like
EPS, DPS, operating cash flow per share, etc

SCOPE

The scope of the study involves objectives, reasons for buy back and procedure and settlement of buy back. The study is restricted to evaluate the buy back process of three companies and the necessity for them doing so.
The scope of.Buyback as a financial Engineering technique can be effective only if it is followed by strong earning flow over the short and long term, which will lead to multiplication of share price on a higher EPS and a constant P/E ratio. Buyback should only be attempted when the future earnings are forecasted to be strong and buoyant and the company can leverage its market capitalization through buyback. If the earning flow decline after the buyback, it would lead to a decline in the share price and impose unnecessary costs on the company due to earlier buyback of shares at a higher price.
The scope of the buyback is for the following reasons.:
1 To return surplus cash to shareholders as an alternative to a higher dividend payment or investing the surplus cash in existing o/ new operations.
2 Adjust or change the company's capital structure quickly, say for those companies seeking to increase its debt/equity ratio.
3 To increase earnings per share and net asset value per share as a possible signal to the market place that management its of the view that the prospects of the company justify a market price higher than the currently accorded by the market.

4 To improve the liquidity of the shares and other performance parameters like EPS, DPS, operating cash flow per share, etc

METHODOLOGY

The methodology adopted for the stuffy is simple. The data for the study is obtained from both primary and secondary sources. The primary data was collected from the Hyderabad stock exchange. For the purpose of documentation the secondary data has been collected from.
1 The annual reports of HSE.
2 The personal interview with the company secretary HSE.
3 The annual reports of Reliance and Venky’s and Excide Ltd.
The data from the websites of BSE, NSE, SEBI

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