CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring
Sharma Industries Ltd has 10 lakh shares outstanding, of which promoters hold 6 lakh. The company buys back and extinguishes 2 lakh shares from public shareholders only. What is the promoters' percentage holding after the buy-back?
The promoters hold 75%. After extinguishing 2 lakh shares, 8 lakh remain outstanding, and the promoters' unchanged 6 lakh shares are 6 divided by 8, which is 75 percent. The original 60% is wrong because it uses the pre-buy-back base.
- A60%
- B70%
- C75%Correct
- D80%
Explanation
Shares after buy-back = 10 lakh - 2 lakh = 8 lakh. Promoters still hold 6 lakh, so 6/8 = 75%. Choosing 60% ignores the reduced base, while 80% wrongly assumes the 2 lakh shares come only out of the remaining 4 lakh public shares and subtracts them again.
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