it is certainly a good sign in respect of the company that announces such a deal since, technically speaking

it is certainly a good sign in respect of the company that announces such a deal since, technically speaking, it means that the management of the company thinks that the intrinsic value of the company share is much more than the price at the stock market and so it makes sense to announce a buyback price which is much more than the market price. Also, especially in India where many companies are managed by families, a company's management may not want to lose the smallest opportu­nity to increase theit stake. The buyback option, therefore, works well. Some companies have 'other reasons to go in for a buyback. "We did it to pull our debt equity ratio near to lx, besides paying back to our shareholders and pulling our EPS up. We had ample cash on our balance sheet and so we opted for buyback. This way it has been of ben­efit to our shareholders," comments a spokesman of SRF, which is among one of the few companies that has completed its buyback exercise in totality. But this is not true for every company. SEBI has, in the past, imposed some informal conditions and compulsions as to the num­ber of shares a company would have to purchase every week during the buyback exercise period irrespective of the price of the stock. For investors it is significantly important to be diligent before parking their money in any company that has announced a buyback. "The best way to do this is by checking the cash balance of the company in its financial books and taking note of the fact whether it is in a position to fund its buyback exer­cise. This will give a fair picture about the intention of the management and reveal the truth about whether it really wants to buy back its shares or is it just a gimmick to lend momentum to a scrip's price," comments the CFO of a com­pany. Considering that only 13 out of 62 companies have been able to achieve complete closure of their buyback since 2008, this homework on the part of the investors is essential