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The process of share splits, which is the process of splitting shares with high face value into shares of a lower face value. It also explains the significance of share splits and how it can improve market liquidity and generate greater investor interest. Additionally, the document explains the concept of buybacks, which is when a company buys its own outstanding shares to reduce the number of shares available on the open market. It also outlines the reasons why companies may choose to do buybacks and the SEBI guidelines for buybacks of shares.
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To increase the EPS ( earning per share ) EPS = EARNINGS / NO OF SHARES. EXAMPLE – ₹10,00,000 /11,00,000 = 0. ₹10,00,000 /8,00,000 = 1. To increase promoters holdings. To support share price. To pay surplus cash to shareholders.
Debt-Equity ratio test – after buy back debt equity ratio test cannot be more than 2:1. All the shares must be fully paid up. (^) Free reserves also include security premium. Buy back can be out of either free reserves or fresh issue.