Isn't it true that when shares are bought back , they are to be compulsorily cancelled within a stipulated time period. or am i confusing this with some other concept?please help...
Yes. When a company buys back its shares, it shall extinguish and physically destroy the share certificates so bought back in the presence of a company secretary in whole time practice within 7 days from the date of acceptance of the shares .The company shall maintain a record of share certificates which have been cancelled and destroyed within 7 days of buy back of shares.
The main objective of buy back is to utilise a portion of the surplus cash to buy back equity shares at a price below its conservatively computed intrinsic value.
This offers a reasonably attractive exit option to those shareholders who wish to do while ensuing that the buy back price is value enhancing to those shareholders who prefer to retain ownership of their stock.
The company intends to provide liquidity to the existing shareholders through this buy back offer to help them to sell the shares at a reasonable price.
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