Dividend Policy at SRF Limited: Buyback of Shares
(7 pages of text)
Case (Pub Mat)
In April 2012, a chartered accountant and financial analyst for the manufacturing firm SRF Limited was asked by her chief financial officer to analyze the company’s cash dividend and share repurchase policy and provide recommendations for the next 12 to 24 months. SRF Limited was a ?38 billion multi-business entity. Having completed its third round of share buyback at ?380 per share, SRF Limited paid an interim and consistent dividend of ?7 per share. The company had engaged in a series of share buybacks since 2006. In light of India’s falling economic growth and pessimistic global economic outlook, the company needed to know if it would be able to maintain its growth. Should the company go ahead with another round of share buybacks and increasing dividends?
This case is suitable for both undergraduate and graduate programs in finance, for courses in corporate finance at basic and advanced levels. The case will help students to understand the theoretical and practical implications of share repurchasing as dividend policy. After completion of the case, students will be able to:
Analyze the financial performance of a firm.
- Understand share buyback policy in the context of Indian companies and the regulation and mechanism of the Securities and Exchange Board of India.
Evaluate the impact of a buyback on a firm’s capital structure and stock price.
- Understand the implications of tax structure on dividend policy.
India, Large, 2012
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