Share Buyback: Meaning, Definition & Indian Stock Market Examples

Company repurchasing its own shares — reduces share count, increases EPS.

Disclaimer: This article is for educational purposes only and does not constitute SEBI-registered investment advice. Consult a SEBI-registered investment advisor before making investment decisions.

What is Share Buyback?

A share buyback (repurchase) is when a company buys back its own shares from the market or via a tender offer, reducing the total shares outstanding. This increases EPS (same earnings, fewer shares), signals that management believes the stock is undervalued, and returns cash to shareholders.

Share Buyback — Indian Stock Market Example

TCS has conducted multiple massive buybacks (₹16,000–₹18,000 crore each) as it generates more cash than it can efficiently reinvest. Infosys, HCL Tech, and Wipro also regularly buy back shares. Buybacks are tax-efficient for promoters (taxed at buyback tax rate) vs dividends (added to income).

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Frequently Asked Questions about Share Buyback

Is a buyback better than a dividend for shareholders?

Depends on the shareholder's tax situation. Dividends are taxed at your income slab rate. Buyback gains (if you tender) are taxed as capital gains — potentially at lower 10% LTCG rate if held > 12 months. For promoters and HNIs in high tax brackets, buybacks are significantly more tax-efficient than dividends. For retail investors needing income, dividends provide direct cash flow.

How does SEBI regulate buybacks in India?

SEBI limits buybacks to 25% of paid-up capital and free reserves in a year via board approval, or up to 10% via tender offer without shareholder approval. A company must wait 12 months before announcing another buyback. The buyback price must not exceed 15% above the average price in 2 weeks before announcement.

Related Terms

Earnings Per Share

Net profit divided by total shares — profit attributable to each share.

Dividend

Cash distribution from company profits to shareholders.

Free Cash Flow

Operating cash flow minus capex — actual cash available after maintaining business.

Promoter Holding

Percentage of shares held by founders/controlling shareholders.

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