Buyback of shares is becoming one of the most cost effective methods of returning the excess cash to the Investors. Though it looks pretty simple to announce the premium and buy the floating stock in the market, there are multiple regulatory compliances to be completed. There have been numerous instances, where the cash rich companies were not able to buy the shares back from the investors and had to approach the regulators for Exemption. Some provisions of the Buy Back regulations were relaxed for the companies like Coal India and WIPRO.
Larsen and Toubro
L&T group is found to be involved in number of controversies these days. Larsen and Toubro (L&T) was recently in the news when Cognizant paid the fines for violation of the FCPA Provisions in USA. Reliance Anil Ambani group alleged the finance arm of Larsen and Toubro group for selling the shares to push the prices low. It was also in news when SEBI rejected their buy back proposal for non compliance with the regulations prescribed by SEBI
Section 68(2)(d) of companies Act, 2013 and Regulation 4(ii) of SEBI (Buy-back Securities) Regulations, 2018 requires that ratio of the aggregate of secured and unsecured debts owed by the company (Larsen & Toubro in this case) after buy-back shall not be more than twice the paid-up capital and free reserves.