What is buyback of shares?

Buyback of shares is a corporate action event wherein a company purchases its own stock from the existing shareholders at a price higher than the current market price. The buyback of shares in India is generally done through tender offer. The companies can also buyback through open market via book building process route. However, this method is not very popular.

The buyback of shares also known as Shares repurchase, allows a company to strengthen the promoter holding, utilize the free cash reserves optimally by rewarding the shareholders, and achieve the optimum capital structure.