Share Buyback
A company purchasing its own shares from shareholders, reducing the share count.
Formula
Post-Buyback EPS = Net Profit / (Shares Outstanding - Shares Bought Back)
Unit
₹ crore
In depth
A buyback returns cash to shareholders like a dividend, but selectively — only those who sell receive cash, while the rest end up owning a larger fraction of the company. It creates value only when shares are bought below intrinsic value; buying above it transfers value from continuing holders to sellers. In India bought-back shares must be extinguished rather than held as treasury stock, so the reduction is permanent. Since October 2024 buyback proceeds are taxed in the shareholder's hands as deemed dividend at slab rates, which removed the tax advantage buybacks had held over dividends.
Worked example
Buying back 3 crore of 30 crore shares lifts earnings per share from 90 / 30 = ₹3.00 to 90 / 27 = ₹3.33, an 11% rise with profit unchanged. Whether that created value depends entirely on the price paid.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Share Buyback” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.