What Is Share Buyback?

This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.

Share Buyback: Definition, Meaning & Basics

Shares issued by a company are bought and sold either on the stock market or over the counter. A company, at certain times, can also decide to purchase its own shares, via a process called share buyback.

In a share buyback, a company announces a price at which it is ready to buy stock from shareholders within a given time frame. Typically, companies with high cash reserves use the buyback route to reduce the number of its shares in the market. A company can also opt for a share buyback multiple times to increase proportionate holding of promoters.

In India, a company can go for a share buyback by using its free reserves, securities premium account or proceeds of an issue of shares or other specified securities. After a company has completed a share buyback, it cannot go for a fresh issue of the same kind of shares.