Buy back of shares

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ROHIT AGGARWAL

ROHIT AGGARWAL (Querist)
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24 November 2013 please tell me that why companies prefer buy back instead of issuing dividend.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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24 November 2013 the preference of buyback over dividend was the tax as the tax benefit.

However now this gap has been reduced as the buyback is now required payment of taxes @ 23% by the company.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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25 November 2013 Additionally also the earning per share is diluted.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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26 November 2013 Dear Tushar,

how is EPS diluted by dividend or buyback for that matter?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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26 November 2013 when the shares are bought back the denominator reduces when we calculate the eps- diluted and hence the eps is increased.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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26 November 2013 Tushar,

that is not referred to as dilution. Dilution of EPS means decrease. The buyback rather would lead to concentration of EPS!!

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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26 November 2013 then what is dilition of eps pls explain????????

Nikhil Kaushik

Nikhil Kaushik (Expert)
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27 November 2013 Diluted EPS refers to adjusting of EPS to convertible instruments such as warrant, convertible debt etc. so where any instrument is issued which can be converted to equity, they will have a potential dilutive effect on EPS.

So Buyback would lead to concentration of EPS. however fresh issue or bonus shares will have dilute impact as they lead to larger denominator. I believe you should covered it in AS - 20.

ROHIT AGGARWAL

ROHIT AGGARWAL (Querist)
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27 November 2013 brother i understand about diluted eps but my doubt about buy back remain unclear . please eleborate it

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Buy back of shares

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