Buyback

A company purchasing its own shares and extinguishing them, which returns cash to shareholders and raises the earnings attributable to each remaining share.

A company earning ₹615 crore that cuts its share count from 50 crore to 47.5 crore lifts earnings per share from ₹12.30 to ₹12.95, before you count the interest the cash would otherwise have earned.

Whether it creates value depends entirely on price. Buying back shares below intrinsic value transfers value from the sellers to the holders. Buying above it does the reverse, and most buybacks are announced after a strong run.

In India buybacks now run through a tender offer, where shareholders can participate proportionally; the open-market route through the stock exchange was phased out from April 2025. The tax treatment has changed repeatedly: from October 2024 the amount a shareholder received was taxed as a dividend at their slab rate, with the cost of the shares allowed as a capital loss, and later budgets have revisited the rule. What you actually get as a shareholder isn't the headline amount, so check the rule in force for the year you're modelling.

Judge a buyback by the price paid. Its size tells you little.