New Frontiers at Banking Frontiers

Remember the summer of 2008? It was a time when the market was crashing down like a war plane shot out of the sky. During that phase of a declining market, companies resorted to various tricks and ideas to somehow hold their nose above water. One of such was the buyback gim­mick which many companies, irrespec­tive of the size and sector, flaunted to attract the investors' fraternity. Some of these companies were successful in their bid and the drop in share prices was therefore milder but then in mid-2009 the prices of these companies spiralled upwards, leaving investors in a tizzy. All this has actually exposed the. mentality of those companies which bluff inves­tors with this buyback tool.
If we go by the data of the companies who announced buyback of their stocks in 2008 and 2009, there have been 62 companies since January 2008 that have gone a buyback spree and the total value supposedly earmarked by them was around Rs 5,919.52 crore. Forty companies out of these have already completed the exercise.
"If we look at these completed cases, on an average these 40 companies have been able to buy back just 49.9 per cent of the total value announced by them earlier," says Jagannadham Thunuguntla, Equity Head, SMC Capital. Certainly this is quite disturb­ing as many investors had been wooed to invest into these companies due to this buyback arrangement. "Only 14 of the 40 companies have actually honoured their commitment of buy­back in full while some of the bigger companies like DLF, Bosch, Godrej and Monet Ispat have bought back just 13, 31, 29 and 24 per cent respectively," Jagannandham adds.