Fundamental Glossary / Shareholding & Ownership
Buyback of Shares
The company purchasing its own shares, reducing the share count and returning cash.
Formula
In India, buybacks follow the Companies Act and SEBI buyback regulations: tender offer or open-market route, within size and price limits, and with a cooling-off period.
What it means
A buyback is the mirror of an issue. Cash leaves, shares are extinguished or held as treasury stock as the law allows, and each remaining share owns a larger fraction of the business.
It is attractive when the shares are bought below intrinsic value, because the selling shareholders exit and the remaining ones gain. Bought above intrinsic value, it destroys value for those who stay.
How to read it
Compare the buyback price with your estimate of value, and compare the size with free cash flow. A debt-funded buyback is leverage as well as a capital return.
What to watch
Promoters may tender or may not. If public shareholders tender and promoters do not, promoter holding rises. That is a control effect, not only a cash effect.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.