NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A company with 50 lakh shares and net profit of Rs 10 crore trades at Rs 400 per share. It buys back 5 lakh shares at Rs 440 through the tender offer route, and net profit is unchanged. What is the post-buyback EPS, to the nearest rupee?
Post-buyback EPS is about Rs 22. Shares fall from 50 lakh to 45 lakh, and with profit unchanged at Rs 10 crore, EPS equals Rs 10 crore divided by 45 lakh, which is roughly Rs 22.22, up from Rs 20.
- ARs 22Correct
- BRs 20
- CRs 18
- DRs 24
Explanation
Shares after buyback = 50 - 5 = 45 lakh. EPS = 10 crore / 45 lakh = Rs 22.22, about Rs 22. Pre-buyback EPS was Rs 20, which is option Rs 20 and ignores the reduction. This assumes no loss of earnings on cash used, as the question states profit unchanged.
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