Share Buyback

In a buyback, a company uses its cash reserves to repurchase shares from existing shareholders. This reduces supply of shares and can increase earnings per share (EPS) and shareholder value.

Buybacks in India are regulated by the Securities and Exchange Board of India and conducted through stock exchanges like the National Stock Exchange and Bombay Stock Exchange.

Types of Share Buyback

• Open Market Buyback: Company buys shares directly from market
• Tender Offer: Company offers to buy shares at a fixed price from shareholders

Why Companies Do Buybacks

• Return surplus cash to shareholders
• Improve financial ratios (like EPS)
• Signal confidence in company value
• Prevent hostile takeovers

Advantages

• Boosts share price (often)
• Tax-efficient compared to dividends (in some cases)
• Increases ownership percentage of remaining shareholders

Risks

• May reduce company cash reserves
• Could signal lack of growth opportunities
• Market may react negatively if poorly timed

"A company buys back 10% of its shares from the market, reducing total outstanding shares and increasing EPS."