{"id":27790,"date":"2018-10-23T16:14:11","date_gmt":"2018-10-23T10:44:11","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=27790"},"modified":"2018-10-23T16:14:11","modified_gmt":"2018-10-23T10:44:11","slug":"what-is-share-buyback","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/what-is-share-buyback\/","title":{"rendered":"What is share buyback?"},"content":{"rendered":"<p><a href=\"https:\/\/www.thehindu.com\/business\/what-is-share-buyback\/article24786612.ece\">What is share buyback?<\/a><\/p>\n<p><u>News:<\/u><\/p>\n<ol>\n<li>\u00a0With prominent companies such as Infosys, TCS, and L&amp;T having gone for a share buyback, there is low-down on the mechanism and the reason for firms taking such a step.<\/li>\n<\/ol>\n<p><u>Important facts:<\/u><\/p>\n<p>2. A buyback is a mechanism through which a listed company buys back shares from the market.<\/p>\n<p>3. A buyback can be done either through open market purchases or through the tender offer route.<\/p>\n<p>4. Under the open market mechanism, the company buys back the shares from the secondary market while under tender offer, shareholders can tender their shares during the buyback offer.<\/p>\n<p>5. Most companies had preferred the open market route.<\/p>\n<p>6. Buybacks are done when a company has a significant cash reserve and feels that the shares are not fairly valued at the current market price.<\/p>\n<p>7. Promoters also use this mechanism to tighten their grip on the firm.<\/p>\n<p><u>8. Benefits:<\/u><\/p>\n<ul>\n<li>Buyback is usually done at a price higher than the then prevailing market price, shareholders get an attractive exit option, especially when the share are thinly traded.<\/li>\n<li>It is also more tax-efficient than dividends as a way to reward shareholders.<\/li>\n<\/ul>\n<p><u>9. A company execute a buyback in the following manner:<\/u><\/p>\n<ul>\n<li>A company can use a maximum of 25% of the aggregate of its free reserves and paid-up capital for a buyback.<\/li>\n<li>A special resolution needs to be passed at a general meeting.<\/li>\n<li>However, it the company plans to use less than 10% of its reserves then only a board resolution is required.<\/li>\n<\/ul>\n<p>10. A company cannot do a second buyback offer within one year from the date of the closure of the last buyback.<\/p>\n<p>11. There are time-bound limitations on further share issuances like preferential allotment or bonus issue post a buyback.<\/p>\n<p>12. These checks have been put in place so that companies do not misuse the buyback mechanism.<\/p>\n<p>13. Recently, The Securities and Exchange Board of India (SEBI) has revised the buy back regulations that stipulate 15% reservation for retail shareholders in a buy back offer.<\/p>\n<p>14. This gives retail investors a fair share in the offer, which otherwise could see large institutional investors tendering their shares leaving little or no room for small \u00a0investors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is share buyback? News: \u00a0With prominent companies such as Infosys, TCS, and L&amp;T having gone for a share buyback, there is low-down on the mechanism and the reason for firms taking such a step. Important facts: 2. A buyback is a mechanism through which a listed company buys back shares from the market. 3.&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/what-is-share-buyback\/\">Continue reading <span class=\"screen-reader-text\">What is share buyback?<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-27790","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27790","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=27790"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27790\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=27790"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=27790"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=27790"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}