TCS: Co. Approved Rs 18,000 Cr buyback at Rs 4,500 per share today
👉Let us know a brief on buyback.
👉 What is buyback , how will it benificial for shareholders and company itself.
Read the whole thread 🧵, if you like it plz share
Source BSE / Chittorgarh .com
1. Undervalued stock
When the management feels that their stock is undervalued, they adopt the buyback to rectify the stock price. Stock buyback reduces the number of shares in the market and thus gives a price boost to the remaining shares in the market.
The dividends get taxed at two levels. First, at the company level and a second time in the hands of the shareholders. However, in the case of a buyback, only the company is liable to pay a buyback tax.
The company promoters can increase its stake in the company by forfeiting the buyback offer. This strengthens their hold over the company and acts as a defense strategy in the case of hostile takeovers.
The capital structure of a company gets represented by its debt-equity ratio. Each industry has a different capital structure requirement.
1. Buybacks boost the share prices rectifying the prices of undervalued stocks.
2. Buybacks improve the company's Key Financial Ratios like EPS , ROE , Return on Asset.
3. Buyback provides an easy exit route for shareholders for undervalued stocks.
5. Buyback serves as a health check on the company's financial position as only the companies with good liquidity position are allowed to announce buyback offers.
1. The improvement in the financial ratios of the company may not be real. The increase may be due to a reduction in the denominator on account of a decrease in the number of equity shares and assets. However, that may not be a real profit.
1. Through tender offer
2. Through Open Market
3. Buyback of shares from Odd-lot holder
(This method of the buyback is less common in India)
1. To be eligible to participate in the Tender offer buyback, a person needs to be an existing shareholder as on the Record Date of the buyback offer.
In the Tender offer, the shares can either be in physical form or Demat form.
in an open offer, generally only the Demat shareholders can be a part of the buyback offer.
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