Tech Mahindra's board has approved its buyback plan of up to 2.05 crore shares worth an aggregate amount not exceeding Rs 1,956 crore at a price of Rs 950 per piece. The part will make up for about 2.10 percent of the total paid-up equity capital of the company.

In a stock exchange release the IT major said that the record date is fixed as 6 March 2019 for the purpose of ascertaining the eligibility of shareholders to participate in the buyback. After the announcement, shares of Tech Mahindra climbed about 3.5 percent to a fresh 52-week high of Rs 840 on NSE.

The company will be buying back shares from the shareholders on a proportionate basis through the tender offer route. This is its first share buyback plan and speaking to CNBC-TV18, Manoj Bhat, the CFO at Tech Mahindra said, "We will conduct buybacks on an annual basis as done by our peers in the industry. It is tax efficient and we do not want excess cash with the company." He said the company plans on adopting a dividend plus buyback strategy. It was not clear if the promoters would be participating in the plan.

Share buybacks are conducted by companies to reduce its number of outstanding shares in the market by buying back a proportion of shares from the shareholders at a price higher than the market rate. Dividends and share buyback plans are ways in which cash-rich companies reward their shareholders by giving away excess cash.