Case: Manas Ltd has paid-up equity capital of ₹2,00,00,000 (shares of ₹10 each) and free reserves, including securities premium, of ₹1,20,00,000. It has negligible debt. It proposes a buyback at ₹32 per share with a special resolution of shareholders. The maximum number of shares it can buy back is:

Correct answer: D) 2,50,000

Explanation

Resources test: 25% x (2,00,00,000 + 1,20,00,000) = 80,00,000; / ₹32 = 2,50,000 shares. Shares outstanding test: 25% x 20,00,000 shares = 5,00,000 shares. The debt-equity test is satisfied since debt is negligible. Maximum = lower of the two = 2,50,000 shares. (1,00,000 would be the limit for a board-only buyback.)