Corporate finance managers foresee a future trend where companies, which have come out with high premium initial public offerings (IPO), rushing for buybacks at sharply discounted prices and issuing fresh shares later at a premium.

At present, there is no rule which prevents a company from making a buyback offer within two years of listing or for a particular time-frame from the date of listing or an IPO. "This would lead to another way of depriving the investors," a corporate finance manager said.

This lacunae will provide non-serious companies and promoters to encash the opportunity at the cost of investors who have been allotted the shares at much higher premiums.

Companies which came out with high premium issues during the boom time are expected to announce buy-backs at a fraction of the IPO price in a gloomy market and cite the depressed market as a major reason for lower buyback price.

"Some companies, in a deliberate move, may also come out with subdued performance which would pull down the share price. Later, they may announce a buyback at a much lower price and delist the company," an analyst said.

In this process, the clear losers will be the investors with the promoters making a killing, he added.

Analysts also suggested a solution to thwart such a situation. "It should be made compulsory for the companies that if the funds raised from the initial offering are not utilised for the purposes mentioned in the prospectus, it should be returned to shareholders," a corporate finance official said.

If the full amount is not returnable, at least a proportionate of the offer price should be returned on buybacks and such funds cannot be allowed to be utilised to buyback at throw-away prices.

The government has also liberalised the cooling-off period from 24 months to six months.

"This is again fought with risk. Promoters may resort to buyback at low prices, reduce the floating stock, push up the price when the markets recover and again issue the shares at high prices," analyst said.

Zenith Infotech is a classic example for this trend. The company, which had come out with an IPO two years back at Rs 110 per share (Rs 125 for financial institutions and mutual funds), has offered a buyback at Rs 35 this month. This offer would raise the promoters' stake to over 90 per cent, which would make the company eligible for delisting.