What is a Buyback?
A Buyback is a corporate action wherein a company repurchases a portion of its shares from the public (investors), usually at a price higher than the prevailing market rate (at a premium). A buyback generally indicates the company’s confidence in itself and hence, this usually impacts its share price positively.
They are commonly used for corporate restructuring, including:
- Consolidating stake in the company
- Reducing the number of shares available in the market
- Preventing a take-over
- Indication promoter confidence in the business
- Improving its share price, etc.
Important Dates during a Buyback Issue:
For example, the TCS Board of Directors approves a Rs. 16,000 crore buyback and related dates are announced.
|Declaration Date: 7th Oct||The day the buyback is announced to the public. |
|Ex-Date: 26th Nov|
To be eligible to participate in the buyback, purchases must be made on or before 25th Nov.
Investors who purchase shares on or after the ex-date will not be eligible to participate in the buyback.
|Record Date: 26th Nov ||All shareholders of TCS as per company records on 26th Nov can participate in the buyback.|
|Buyback Window: 18th Dec - 1st Jan |
Eligible shareholders will be intimated regarding the application window.
If desired, shareholders can tender (all/a part) of their shares in exchange for cash during this window.
If the total number of shares tendered is more than the issue size, shares are bought-back proportionately from each shareholder.
The number of shares tendered for the buyback are blocked in the investor's demat account.
The day funds are credited to the registered back account of shareholders.
Shares that have not been approved for the buyback will be unblocked in the investor's demat account.
Since we have shifted to the T+1 settlement cycle, the ex-date and record date for corporate actions fall on the same day.