Buyback of Securities and Open Offer of Shares

Buyback of Securities and Open Offer of Shares

Disclaimer 2 Information contained in this presentation is as on August 31, 2021. This presentation may be used with the permission of SEBI and only for nonprofit awareness programs, This presentation is only for Educational and Awareness Programs and not for any legal interpretations.

Buyback of Securities

Flow of Presentation 4 1. What is Buyback of Securities 2. Methods of Buyback of Securities 3. Common reasons for Buy-back 4. How to apply in a Buyback 5. Points to ponder before participating in Buyback

What is Buyback of Securities 5 The Corporate action where a company repurchases its own shares from its existing shareholders Buyback : Opposite of public issue of shares In a public issue, company sells its shares in the stock market In a Buyback, company offers to buy shares from the investors. After buyback, those shares are extinguished.

Common reasons for Buy-back 6 Issue of shares To return surplus cash to shareholders Improve return on distribution of cash equity shares through Improve earnings per share (EPS) by reduction of Company Shareholders shares (buy-back reduce the total number of shares of the company) Buyback of shares Shareholders get option either to sell shares and receive cash or not to sell shares and get an increase in percentage shareholding post buyback without additional investment

Conditions for Buy-back 7 Maximum Buy-back Limit Debt to Equity Ratio* Approved by Special/ Board Resolution Cooling period# 25% of (Paid-up capital Free Reserves) 2:1 Board Resolution would suffice if Buy-back 10% of (Paid up capital Free Reserves) Special Resolution required, if more than 10% 1 year from the date of expiry of buyback period * Paid up capital & free reserve # No offer of buy-back should be made by a company within a period of one year from the date of the closure of the preceding offer of buy-back

Methods of Buyback 8 Buyback Tender offer Open Market (Stock exchang e Mechanis m)can tender Shareholders Odd lot Buybac k Tender offer : their shares on a proportionate basis Odd Lot Buyback : Provisions of buy-back through tender offer shall be applicable Open Market: Shareholder can sell shares in the secondary markets

Buy Back - Tender offer 9 Reservation for small shareholders: 15% of the no. of securities proposed to buy back or no. of securities entitled as per their shareholding, whichever is higher Public Announcement (PA) within 2 working days of special resolution or Board resolution. Record date for determining the entitlement. Dispatch of Final letter of offer within five working days from the receipt of communication of comments from SEBI Tendering period opens not later than 5 days from the date of dispatch of letter of offer Tendering remains open for a period of 10 days

Methods of Buyback (Comparison) 10 For Buyback, a public announcement made by Company Limit on Buyback Size Pricing Shareholders Participation Retail Shareholders Reservations Offer Period TENDER ROUTE OPEN MARKET ROUTE Up to 25% of Net Worth Up to 15% of Net Worth Fixed Price Multiple pricing subject to cap of maximum offer price Only Record Date shareholders 15% of buyback size to be reserved for small shareholders 10 working days All shareholders N.A. 6 months In open market route, the Company has the option to close the buyback, once it achieves the maximum buyback size or utilizes at least 50% of the amount earmarked for buyback, whichever is earlier

Offer Price & Record Date 11 Offer Price Price Price at at which: which: Shares Shares will will be be bought bought back back by by the the Company Company Offer Offer price price determined determined by by the the Board Board of of the the Company Company TENDER OFFER Fixed Price OPEN MARKET Multiple Multiple pricing pricing subject to subject to cap cap of of maximum offer price When When is is itit beneficial beneficial for for shareholders shareholders to to tender tender their their shares? shares? Offer Offer Price Price is is equal equal to/ to/ higher higher than than the the market market price price Opportunity Opportunity for for the the shareholders shareholders to to exit exit thinly thinly traded traded stock stock Record Date & Significan ce Cut-off Cut-off to to determine determine the: the: Eligibility Eligibility to to participate participate in in buyback buyback Entitlement Entitlement Ratio Ratio Dispatch Dispatch of of LOF LOF & & Tender Tender Form Form TENDER OFFER Record Date is determined OPEN MARKET Record Date Not applicable as buyback is open to all shareholders

Tender Route - How to Apply? 12 SHAREHOLDER’s BROKER * * Participate Participate through through Brokers Brokers APP/ APP/ Website Website Indicate Indicate buyback buyback bid bid to to the the broker broker who who will will in in turn turn place place the the bid bid Submit Submit an an application application on on plain plain paper paper by by providing providing all all requisite requisite details details THIRD PARTY REGISTERED BROKER/ COMPANY’s BROKER Participate Participate through through stock stock broker broker and and make make aa bid bid by by using using quick quick unique unique client client code code (“UCC”) (“UCC”) facility facility Will Will process process bids bids received received from from eligible eligible shareholders shareholders 1) Shareholders can tender shares as per their entitlement ratio (given in public announcement) 2) Shareholders holding physical shares shall bid through the broker 3) * If shareholder’s broker is not registered with the designated stock exchange for buyback, then the shareholder can approach any registered stock broker/ Company Broker to make a bid, using UCC facility

Tender Route – Trade & Settlement 13 Shareholder to approach the Broker to participate in Buyback (provide details of number of shares to be tendered) Direct transfer of accepted shares to Company’s A/C Receipt of buyback consideration by the shareholder Transfer the tendered shares to special A/C of Clearing Corporation Broker to bid using the acquisition window of the stock exchange Settlement Date Buyback Closure Finalization of Basis of Acceptance Return of unaccepted shares back to the shareholders by the Clearing Corporation Broker to issue contract note to the shareholder

Open Market Route – How to Apply? 14 DEMAT DEMAT SHAREHOLDING SHAREHOLDING PHYSICAL PHYSICAL SHAREHOLDI SHAREHOLDI NG NG SNAPSHOT OF OPEN MARKET TRADE Sharehold Sharehold er er Company Company T Day Places “Trade” T Day Places “Buy” order T 1 Shares SELLER SELLER BROKER BROKER T 2 Receipt of Money CLEARING CLEARING CORPORATI CORPORATI ON ON T 2 Money T 2 Shares COMPAN COMPAN Y Y BROKER BROKER T 1 Money T 2 Receipt of Shares in buyback Escrow A/C Tendering Tendering can can be be done done only only after after shares shares are are dematerialized dematerialized and and hence hence physical physical shareholders shareholders to to approach approach the the concerned concerned depository depository participant participant for for the the same same

Points to ponder before participating in Buyback 15 Participation in Buyback is voluntary Shareholders holding shares as on Record Date shall only be eligible to tender their shares in the Buyback. Decide to participate if one feels that the share price in the market is overvalued or you don’t believe company will perform well in going forward. Read disclosures made by company in the public announcement Basis for arriving at the buyback price For buyback through: In an open market method : Understand the no. of shares, quantum, objective of buyback and maximum buyback price. In a tender method: understand no. of shares, quantum, objective of buyback, entitlement ratio and buyback price.

16 Open Offer of Shares

Flow of Presentation 17 1.What is Open Offer of Shares 2. Methods of Open Offer of Shares 3. Why Open Offer is mandated 4. How to apply in an Open Offer 5. Points to ponder before participating in Open Offer

What is an Open Offer? 18 What is an Open Offer? An Offer given by an Acquirer to the shareholders of a company to buy their shares at a fixed price. When is the Offer made? Mandatory Offer – When the shareholding of Acquirer increases beyond the prescribed limit or in case of change in control of company. Voluntary Offer – Voluntarily acquire through an Open Offer . What should the size be? Mandatory Offer – Min offer size of 26% of the total paid up capital up to max 100%. Voluntary Offer – Min offer size of 10% of the total paid up capital up to max 75%

Why Open Offer is mandated 19 Any substantial acquisition of shares results in change in ownership Change in ownership of company may result following changes: Company management Business profile Company Strategy Business plans Hence, to give fair exit to investor in case they don’t agree with change of ownership.

Acquisition 20 means Directly OR Indirectly Acquiring OR Agreeing to Acquire Shares OR Voting Rights Target Company OR Control

Offer Size 21 Number of shares to be acquired from public: In Mandatory Open Offers: Minimum 26% of the share capital If post offer holding maximum permissible non public shareholding (MPNPS), acquirers to undertake to bring it back within 1 year. In voluntary offers by shareholders holding more than 25% Size at least 10%, shall not be such so as to cross MPNPS.

Mandatory and Voluntary Open Offer 22 Mandatory Open Offer Acquirer Owns Owns 25% 75% 25% 75% Owns Owns 25% 25% No Nocontrol control Target Company Public Shareholders Acquires 5% in FY Exceeds 25% stake Acquires control Mandatory Open Offer 26% Voluntary Open Offer Owns Owns 25% 75 25% 75 % % Existing Shareholder Target Company Public Shareholders Voluntary acquisition through Open Offer 10%

Activities and Timeline 23 Date of Public Announcement (PA) for open offer Detailed Public Statement (DPS) Dispatch of Letter of Offer to the shareholders To be published on the date of trigger To be published within 5 working days of PA Offer to open Letter of offer issued by acquirer containing details of open offer. To be dispatched within 7 working days from the receipt of SEBI Comments on the Draft Letter of Offer. Offer to close Offer to remain open for 10 working days Within 10 working days of closure Payment of consideration, transfer of shares

How Offer Price is Arrived at 24 Offer Price Offer Offer Price Price is is the the price price at at which which shares shares will will be be bought bought from from the the shareholders shareholders by by the the Acquirer Acquirer Frequently Frequently traded traded shares* shares* The The highest highest of: of: (i) (i) Highest Highest price price paid paid by by Acquirer Acquirer // Person Person acting acting in in concert: concert: negotiated negotiated price price under under the the agreement agreement The The volume-weighted volume-weighted average average price price for for acquisitions, acquisitions, during during the the 52 52 weeks weeks immediately immediately preceding preceding the the date date of of the the public public announcement announcement The The highest highest price price for for any any acquisition, acquisition, during during the the 26 26 weeks weeks immediately immediately preceding preceding the the date date of of PA PA Infrequently Infrequently traded traded shares shares Determined Determined by by the the Acquirer Acquirer and and the the Manager Manager to to the the open open offer offer Based Based on on valuation valuation parameters parameters including, including, book book value value comparable comparable trading trading multiples, multiples, and and such such other other parameters parameters as as are are customary customary for for valuation valuation of of shares shares (ii) (ii) The The volume-weighted volume-weighted average average market market of of such such companies companies price price for for 60 60 trading trading days days immediately immediately preceding preceding *Frequently traded shares means shares of a target company, in which the traded turnover on any stock exchange during the 12 calendar the date of PA exchange where the preceding date the of month PA in(from (from the exchange where months which the the PA is made, is at least 10% of the total number of shares of such class of the target company maximum maximum volume volume is is recorded recorded during during this this period) period)

Methods of Tendering shares 25 Open offer Off-market transfer Stock exchange Mechanism

Offer Route – Off-market 26 Shareholder to make off-market transfer of shares to Escrow Open offer Demat account (account details given in Letter of Offer) Direct transfer of accepted shares to Company’s A/C Receipt of consideration by the shareholder Shareholder to send Form of Acceptance-cumAcknowledgment to collection centers of RTA Shareholder holding physical shares shall send Original certificates, duly signed transfer deed, copy of PAN card to RTA Settlement Date Open Offer Closure Finalization of Basis of Acceptance Return of unaccepted shares back to the shareholders by the Clearing Corporation Broker to issue contract note to the shareholder

Offer Route – Stock Exchange Mechanism In case of dematerialized shares 27 Shareholder to approach the Broker to participate in Open Offer * (provide details of number of shares to be tendered) Direct transfer of accepted shares to Acquirer’s A/C Receipt of open offer consideration by the shareholder Transfer the tendered shares to special A/C of Clearing Corporation Broker to bid using the acquisition window of the stock exchange & generate TRS* Settlement Date Open Offer Closure Finalization of Basis of Acceptance Return of unaccepted shares back to the shareholders by the Clearing Corporation * TRS: Transaction Registration Slip : Contains no of shares tendered, Bid Id No., etc Broker to issue contract note to the shareholder

Offer Route – Stock Exchange Mechanism In case of Physical shares 28 For shareholders holding physical shares - Post placement of bid by broker, following documents along with Transaction Registration Slip (TRS) shall be submitted to the Registrar and share transfer agent (RTA) Original share certificate(s) Duly filled valid share transfer form(s) (Form SH-4) (by all registered shareholders in same order and as per the specimen signatures registered with the Target Company) Duly witnessed at the appropriate place authorizing the transfer in favour of acquirer Self-attested copy of the shareholder’s PAN card (in case of joint holders, PAN card copy of all transferors)

Withdrawal of Open Offer 29 Offer once made cannot be withdrawn EXCEPT in the following circumstances Statutory Approvals required have been refused. Acquirer, being natural person, has died. Any condition in the agreement is not met for reasons outside the reasonable control of the acquirer Circumstances as in the opinion of the SEBI, merit withdrawal

Points to ponder before participating in Open offer 30 Participation in open offer is voluntary. Read disclosures made by acquirer in the public announcement. Read recommendations of independent directors of the company published in the newspapers before deciding to participate in the open offer. Decide to participate after considering: (i) if believe that the ruling share price in the market is overvalued, (ii) if don’t believe that the company will perform well in going forward upon change in control. Tendered bids / shares cannot be withdrawn by the shareholders. Upward offer price revision can be made at any time prior to 3 days of tendering period. Provision for interest payment to the shareholders in case of delay.

Additional Information 31 For further information you may visit the following websites: w w w. s e b i . g o v. i n w w w. i n v e s t o r. s e b i . g o v. i n For grievance redressal you may visit: w w w. s c o r e s . g o v . i n Or you may call at SEBI Toll Free Helpline Numbers between 9:00 am to 6:00 pm: 1800 266 7575 1800 22 7575 The helpline is available in 8 languages; English, Hindi, Bengali, Gujarati, Marathi, Kannada, Telugu and Tamil

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