What is a Buyback?
- Buyback or share repurchase is a corporate action in which a company buys back its shares from their shareholders. Generally, companies buy back shares at a price higher than the current market price. There are two types of buybacks: tender offer and open market offer. Companies can choose either of these methods to buy back shares from their shareholders.
- Tender offer: The company makes an offer to buy back its shares at a particular price (offer price) at which the shareholders can tender, i.e., sell their shares. The amount is credited to the shareholders primary bank account. Clients can apply for more shares than their entitlement or eligibility. However, if more shares are tendered than the entitlement, the acceptance of these additional shares for buyback is subject to the acceptance ratio determined by the company. Any shares not accepted will be returned to the demat account by the RTA.
- Open-market offer: The company can buy back its shares by actively buying from sellers on the exchange. The buyback period is mentioned in the buyback offer, and it can last for months. The amount is credited to the shareholders trading account. The buyback period can be checked by visiting the SEBI (WEB) website