Research on the Guidelines, Regulations, and Effects of Share Repurchases in the BFSI Sector
1. Damanpreet Kaur
2. Anurag
1. Associate Professor, Rayat Bahra Institute of Management, Hoshiarpur, India Email damankaur21@gmail.com
2. Student, Rayat Bahra Institute of Management, Hoshiarpur, India
Abstract
With an emphasis on how this corporate strategy impacts firm value, this study examines the procedure and outcomes of share buybacks in India’s BFSI industry. Although they were not feasible before 1999, when the Companies Act was amended, share buybacks are now permitted in India. To improve EPS (earnings per share), re-optimize their capital structure, and boost shareholder value, companies repurchase shares. The study looks at the financial reasons for buybacks, such as managing surplus cash, adjusting the debt-to-equity ratio, reducing taxes, and informing the market of undervaluation. The Companies Act and SEBI guidelines govern buyback procedures, which include provisions for funding constraints, capital usage limitations, and the issue of new capital after the buyback. This can result in brief price gains and serve as a signal to the market of potential future growth prospects when management believes that shares are undervalued. The study investigates these reasons and evaluates how buybacks affect a company’s liquidity, solvency, and operational effectiveness. To investigate the relationship between the percentage of capital used for buybacks and firm value beyond simple stock price movements, the authors of this study gathered data from companies registered on the Bombay Stock Exchange. By examining the effects of share buybacks on company value at the sector level within India’s BFSI industry, the study seeks to add to the body of knowledge on corporate finance strategies in emerging markets.
Keywords: Emerging markets, SEBI regulations, BFSI, regulatory framework, and share buyback
DOI link – https://doi.org/10.69758/GIMRJ/2501I01S01V13P0006