Abstract

The case study discusses the share buyback offer issued by CARE Ratings Limited, one of the leading credit rating companies in India. Many experts believe that this was an opportunity for investors to encash their investment in the company as the buyback price of Rs. 515 per share represented a premium of 11.50% and 10.35% on the volume weighted average market price of the share on the Bombay Stock Exchange (BSE) and NSE respectively, during the three months before July 12, 2022, the day the company intimated to stock exchanges about the buyback. However, another group of analysts felt that shareholders should ignore the buyback and wait for the upside movement in the stock as investment in the company was a good long-term bet. In addition to this, they felt that post-buyback, the shares would trade above Rs. 515, so shareholders would get a better price then than the buyback offer price. Now, the shareholders have to decide whether to tender the stocks during the buyback or not.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• To understand the various motives behind a share buyback
• To understand the regulatory requirement related to share buyback
• To apprehend the process of share buyback
• To debate whether shareholders should participate in the tender offer or not

Keywords

Share Buyback; Various regulations related to share buyback; Share repurchase; Reasons for share buyback; Capital Structure