{"id":6111,"date":"2022-12-09T07:20:10","date_gmt":"2022-12-09T01:50:10","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=6111"},"modified":"2025-03-27T12:51:20","modified_gmt":"2025-03-27T07:21:20","slug":"what-is-a-share-buyback","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-is-a-share-buyback\/","title":{"rendered":"What is a Share Buyback?"},"content":{"rendered":"<h2><strong>What is Share Buyback?:<\/strong><\/h2>\n<ul>\n<li>When a listed company buys its own shares from the existing shareholders, it\u2019s known as a share buyback, which is also called a <strong>share repurchase.<\/strong><\/li>\n<li>The process reduces the number of outstanding shares in the open market over a period of time.<\/li>\n<li>A company can buy back its shares from shareholders on a proportionate basis through a tender offer, or from the open market via book-building process, stock exchanges, or from odd-lot holders.<\/li>\n<li>The maximum limit of any buy-back is 25 per cent or less of the aggregate of paid-up capital and free reserves of a company.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What are the reasons for share buyback?<\/strong><\/h2>\n<ul>\n<li>One of the reasons for a company to go for the buyback of shares is when it feels that its stock is undervalued or has fallen too much.<\/li>\n<li>By buying outstanding shares, a company <strong>reduces the number of shares in the market<\/strong> and this can increase the value of the remaining shares.<\/li>\n<li>Share buyback also helps in <strong>increasing the promoter shareholding,<\/strong> which can act as a safeguard against any threat of hostile corporate takeover.<\/li>\n<li>There were instances when promoters also participated in the buyback and surrendered their shares.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is the benefit for shareholders?<\/strong><\/h2>\n<ul>\n<li>Through buyback, a company can reward its <strong>shareholders in a tax-effective manner.<\/strong><\/li>\n<li>The dividend that a company pays is taxed at the company level and also at the shareholder level.<\/li>\n<li>In the case of share buyback, the company pays the tax and shareholders are exempted from paying tax on the income generated in the process.<\/li>\n<li>If the company offers a higher price than the market price, shareholders, who are not keen to stay invested in the company, can surrender their shares and exit.<\/li>\n<li>While a company can go for repurchase of its shares when it is sitting on a lot of cash but does not have many avenues to invest and prefers to return cash to shareholders.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Who is eligible to participate in the buyback?<\/strong><\/h2>\n<ul>\n<li>To be eligible to participate in the share repurchase process, a shareholder needs to hold the shares of the company, which has announced the buyback, before the record date declared in the announcement.<\/li>\n<li>The share also needs to be held in the demat form.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is Book Building?<\/strong><\/h3>\n<p>Book building is the process by which an underwriter attempts to determine the price at which an initial public offering will be offered.<\/p>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/paytm-share-buyback-explained-8314962\/\" target=\"_blank\" rel=\"nofollow noopener\">Indian Express<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When a listed company buys its own shares from existing shareholders, it\u2019s known as a share buyback.<\/p>\n","protected":false},"author":5,"featured_media":6112,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-6111","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6111","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=6111"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6111\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/6112"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=6111"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=6111"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=6111"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}