What are the Various Methods in which a Company Can Buyback its Own Shares?

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Company's in India from time to time resort to various methods for buyback of shares. This is to reduce the capital base or to help improve the intrinsic value of the shares. A company can buyback shares in the following manner:

What are the Various Methods in which a Company Can Buyback its Own Shares?
i. From the existing shareholders on a proportionate basis through the tender offer;

ii. From open market through:
a. Book building process
b. Stock exchange,

i. From odd lot holders.

It's also important to note that a company can buyback its shares without shareholders' resolution. However, it can do so only to the extent of 10 per cent of its paid up equity capital and reserves. On the other hand if a company wishes to buyback shares to the extent of 25 per cent of its paid up share capital and reserves it has to get the same approved by shareholders.

Listed companies must inform the stock exchanges of their intent to buy shares and must follow the above guidelines depending on the extent of the buyback.

Generally, a buyback offer is filed with the Securities and Exchange Board of India which intimates all through a press release, which is placed on the SEBI website.

How to Take Part in the Buyback of Share Offer?

Every company that makes a buyback sends you a form which has to be filled in. IN case you do not receive the tender form, you can also can make an application on plain paper stating your folio number, name, address, number of shares held, share certificate number, distinctive numbers, number of shares tendered, together with the original share certificate and tender the same at the collection centres/registrars, as mentioned in the public announcement.

What is the manner in which the company decides the acceptances from each shareholders?

In case the shares of the company are tradable compulsorily in demat segment, the acceptances from any investor shall be on a proportionate basis irrespective of the number of shares tendered in the buyback, and irrespective of whether shares are in physical or demat form.

If the shares are not in compulsory demat segment, first the entire shares tendered being less than the minimum market lot shall be accepted in full. Thereafter, the acceptances will be on proportionate basis in a manner to ensure that the acceptances are in market lot. In such a case, a draw of lots shall be done, as in the case of public issues.


Information Courtesy: SEBI

Read more about: shares, share buyback
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