Monday, February 4, 2013

Shares Buyback

Warren Buffet of Berkshire Hathway made fortunes in share by using intelligence and diligence. He was a pioneer in buyback of shares. If the share market does not give him the money the shares deserves he would buyback. He knew his value and never hesitated to assert it as an action.
In India, we have seen reports of partial buyback. This is treated as unwelcome by SEBI and Shri Sinha is framing rules to prevent them.
The earlier SEBI chief Bhave was rumoured to be Ambani protege. Shri Sinha was in Finance ministry, Central Government and took the office of SEBI with confidence. From what we could read in newspapers, he seemed to have won the confidence of many over there in Mumbai Dalal Street.
Now this shares buyback thing. One thing why should not a businessman buyback his shares? Secondly why should not he buyback partially? It is a pure financial decision of the businessman which makes him do what he feels the best for his shares.
Framing rules like a government, by SEBI is uncalled for. What profitable financial activity is done by the government? Its activities are a loss in terms of fiscal deficit. Framing rules like government will only result in more and more malpractises. It is a wrong medicine for an incorrectly perceived illness.
 

2 comments:

  1. Interesting, I was not aware of this concept but I do think that companies should be allowed to buy back their own shares if they want to.

    Destination Infinity

    ReplyDelete
  2. Thanks, Destination Infinity.
    My newspaper, HT, emphasises and teaches economic concepts. The business section of HT. Many times we are taught to learn important concepts like balance of payments, GAAR etc through question-answer articles.

    ReplyDelete