Share buybacks approved by companies allow investors to gain value on their invested amount in these scrips. As it is companies through the process distribute excess surplus or cash reserves with them to their shareholders by repurchasing back the floated shares at a premium when they do not have further expansion plans. Two decent buybacks will be offered in the near future and if you track the financial markets, you may be tempted to try your hand out in these share buyback offers to earn some extra bucks.
Rules for share buyback
In case of the share buyback schemes, the capital market regulator has mandated a reserved portion for the retail class at 15% who have in hold shares of the company worth upto Rs. 2 lakhs taking into account the market value of the scrip as on the record date of the buyback offer.
Know the process to tender your shares in the buyback scheme
1. Just as you buy shares using the demat account, the same way you can tender shares during the offer by visiting the online demat account. If the buyback offer has been opened by the company, you will see it flash either under an Offer for sale offer or as a distinct buyback option.
2. You need to check the price fixed for the buyback to acknowledge the return the offer will fetch you. At the same time, for how many days the offer remains valid as during this time only the shares will be repurchased by the company.
3. Record date is another crucial parameter to apply or be eligible for a buyback as you should be having shares in the portfolio before this date as else you will not be able to apply.
4. The tender form by the company is displayed and you need to enter the quantity of shares you wish to tender. There is an acceptance ratio attached to this, whereby accordingly the company will entertain your request.
5. In a typical tender form that is sent to the eligible party:There are given 3 fields saying, number of shares held of the company as on record date, number of shares eligible for the buyback and number of shares being applied for a buyback.
6. After the application is made the shares booked for the offer are transferred to the R&T agent and the brokerage house sends the transaction registration slip or acknowledgment for your request for share tender.
7. Any share tender offer made over and above the acceptance ratio will be credited back to the customer's demat during the course. Acceptance ratio for the share buyback scheme is usually calculated after the shares are tendered depending on the number of retail investors and the share count number applied during the tender.