Share Buyback: What It Means, Why It Happens & How You Can Apply

Ever heard companies talk about a share buyback and wondered what that’s all about? Simply put, it’s when a company purchases its own shares from the market. It might sound odd at first, why buy your own shares? But this move, also known as a buyback of shares, can have powerful effects. Understanding what is share buyback, why companies do it, and how you can apply for one could help you spot valuable opportunities in your portfolio.

What Is Share Buyback?

Share buyback (or buyback of shares) refers to a company using its cash reserves to repurchase its own shares from existing shareholders or open market channels. This reduces the total number of outstanding shares, increasing earnings per share (EPS) and often boosting the stock price. It’s like giving a tip of confidence to the market: “We believe our shares are undervalued.”

Buyback of Shares: Why Companies Do It

1. Boost Earnings Per Share (EPS)

With fewer shares circulating, the same profits spread over fewer units, resulting in a higher EPS, which often appeals to investors.

2. Return Cash to Shareholders

Instead of paying dividends, companies may choose buybacks, giving shareholders flexibility to hold or sell.

3. Signal Strong Financial Health

Declaring a buyback shows confidence, management believes shares are undervalued and the company has excess cash.

4. Minimize Dilution

If a company issued stock options to employees, buybacks help offset the increased share count and keep EPS intact.

Upcoming Buyback of Shares: What to Watch

In mid-2025, several companies are planning major rounds of share buyback. Some notable ones include:

• TCS Buyback: Tata Consultancy Services has announced a substantial buyback. Shares closed around ₹3,400, and the buyback price is ₹3,500. If you’re wondering how to apply TCS buyback online, companies provide detailed instructions on their websites.
• Reliance Industries: A 0.5% buyback is set to begin in Q3 2025, aiming to return nearly ₹12,000 crore to shareholders.
• ITC Limited: Has also announced a mid-2025 buyback, marking one of the largest in its history.

Always check official announcements for upcoming buyback of shares, timelines, and tender ratios.

How to Apply TCS Buyback Online & Other Buybacks

Here’s a step-by-step guide, applicable to how to apply TCS buyback online and other public buybacks:

1. Check the Buyback Announcement: Look at company circulars or stock exchange filings for details like record dates, buyback ratio, and pricing.
2. Quoting Crop (Demat): Make sure your shares are in your Demat account before the record date. They will be locked-in once the buyback opens.
3. Use Your Trading Platform: Go to the buyback section (e.g., “TCS Buyback Offer”), enter the number of shares, and place your bid.
4. Set Your Price: For fixed-price buybacks, there’s no choice. For book-building ones, choose your price within the specified range.
5. Submit via ASBA: Use your bank’s ASBA interface to lock the bid amount—no fund transfer until shares are successfully taken.
6. Share Allocation: Shares are allotted in proportion to your bid. If unsold, shares are returned to you; if allotted, they’re debited and payment processed.
7. Confirmation & Payment: Check your Demat and bank accounts for share status and payment details.

Cash Offer vs Tender Offer: Same Buyback, Different Routes

When a company plans a share buyback, it can choose between two main methods: open-market buyback or tender offer.

1. In an open-market buyback, the company repurchases shares directly from the stock exchange over time. It’s more flexible for the company but less predictable for investors, with limited price clarity.
2. On the other hand, a tender offer is more structured. The company announces a fixed price or a price range (via book-building), and shareholders can choose to sell their shares at that price. This method, often used by companies like TCS, is more transparent and typically more favorable for retail investors.

Tender offers allow small shareholders to participate confidently, knowing the price upfront, while open-market buybacks are better suited for long-term volume-based repurchases. Choosing the right method depends on the company’s goals and investor expectations.

Buyback of Shares Meaning for Investors

A share buyback is when a company repurchases its own shares from the stock market or directly from shareholders. But what does that mean for you as an investor? Let’s make it simple.

Why Do Companies Buy Back Shares?

When a company feels it has excess cash and its shares are undervalued, it might decide to buy back shares to reduce the number in circulation. This often leads to an increase in share price and earnings per share (EPS), both good news for investors.

Benefits for Investors

• Share Price Gain: After a buyback announcement, stock prices typically rise due to reduced supply.
• Choice: You can sell your shares back or continue to hold them if you expect further price appreciation.
• Tax Efficiency: Unlike dividends, buyback income is taxed at the company level. You usually don’t have to pay tax on it directly.

Risks You Should Know

• Price Volatility: After the buyback ends, prices can drop.
• High Competition: Large investors may take most of the buyback allotment.
• Not Always Profitable: If the buyback price is lower than your purchase price, it may not benefit you.

What Investors Should Do

1. Stay Alert: Keep an eye on buyback announcements.
2. Review Buyback Price: Compare it with your purchase price before participating.
3. Check Your Demat: Ensure your shares are reflected correctly before the record date.
4. Use ASBA Facility: It holds your funds safely during the tender period.
5. Understand Taxes: Gains below ₹1,000 may be exempt; over ₹1,000, LTCG applies if held over a year.
6. Post-Buyback Strategy: Monitor the stock after the buyback ends to decide your next move.

Upcoming Buybacks: What to Expect

In FY 2025-26, SEBI may tighten buyback norms. Most buybacks will use tender offers, and investor awareness through platforms like SMC Global Securities will likely increase. Many companies are expected to return excess cash through buybacks, especially during Q2 and Q3.

Staying informed and understanding the buyback of shares meaning can help you make smarter, tax-friendly investment decisions.

Share buyback is a strategic tool companies use to reward investors, manage share supply, and signal confidence. Knowing what is share buyback, how it works, and how to apply TCS buyback online helps you make smart investment decisions.

Whether you’re considering the upcoming buyback of shares from IT, energy, or FMCG firms, always evaluate the price, your holding, and the buyback’s long-term impact. Tools and alerts from SMC Global Securities can guide you through every step—from news alerts to tender submissions and tax calculations.

Frequently Asked Questions – FAQs

1. What is share buyback and how does it work?

A share buyback is when a company repurchases its own shares from the existing shareholders. This reduces the total number of shares in the market and often boosts the stock price. It shows confidence in the company’s future and rewards investors.

2. How to apply TCS buyback online in 2025?

To apply for the TCS buyback online, log in to your broker’s platform (like SMC Global Securities), go to the corporate actions section, choose TCS, and tender the number of shares you want to offer. Ensure your shares are in your Demat account before the record date.

3. What is the difference between dividend payout and share buyback?

Dividends are cash payouts made directly to shareholders. Share buybacks reduce the number of outstanding shares, which may increase the stock price. Buybacks are often considered more tax-efficient than dividends.

4. How to track upcoming buyback of shares in India?

You can track upcoming buybacks through stock exchange filings, company announcements, and platforms like SMC Global Securities, which provide timely updates on corporate actions and tender offers.

5. Are there taxes on the buyback of shares?

Yes. In India, companies pay a buyback tax of 20% (plus surcharge and cess) on the distributed income. The amount received by shareholders is generally exempt from tax in their hands under Section 10(34A) of the Income Tax Act.