Parimal Pharma Ltd. sold its few brands to another pharmaceutical company namely Areva Ltd. for a sum of ₹6,000 crore. Number of options were available to Parimal Pharma Ltd. to deploy these funds to generate profits for
CS Professional · Capital Commodity and Money Market · PYQS · June 2018
Parimal Pharma Ltd. sold its few brands to another pharmaceutical company namely Areva Ltd. for a sum of ₹6,000 crore. Number of options were available to Parimal Pharma Ltd. to deploy these funds to generate profits for the company. A team was constituted to decide and finalize the following proposals: (I) ₹2,000 crore shall be invested in the equity of various companies as a strategic partner. (II) ₹1,500 crore shall be used to provide inter-corporate loans as to provide yield of 12%. (III) ₹1,500 crore shall be used to buy back its own equity shares having face value of ₹10 each at a price of ₹3,000 per share (present market price of ₹2,400 per share) being 10% of the paid up equity share capital of the company by way of tender route wherein promoters also intend to participate. Promoters hold 75% equity shares in the company. (IV) ₹500 crore were allocated to a team which will actively participate in capital and commodity market to generate a return of 15%. Proposal III (c) ₹1,500 crore shall be used to buy back its own equity shares having face value of ₹10 each at a price of ₹3,000 per share (present market price of ₹2,400 per share) being 10% of the paid up equity share capital of the company by way of tender route wherein promoters also intend to participate. Promoters hold 75% equity shares in the company. (iv) Calculate the total share capital in numbers as well as amount and also the number of shares held by promoters.
Answer & Explanation:
Proposal III(c)(iv) - Share Capital and Promoters' Holding Calculation Number of Shares to be purchased under Buy Back = ₹1,500 Crores / ₹3,000 = 50,00,000 shares. Total Number of Shares to be purchased under Buy Back / 0.10 = 50,00,000 / 0.1 = 5,00,00,000 shares. In amount terms = 5,00,00,000 shares x ₹10 (face value) = ₹50 Crores. Promoters Equity: 75% that is 75% of 5 Crores (shares) = 3.75 Crores shares. Total Amount (Promoters' holding) = 3.75 Crores shares x ₹10 (face value) = ₹37.50 Crores.
Topics: Buyback of Shares
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