What is Buyback of shares?

BuyBack Difination

When a company buys shares from company shareholder,this process is called Buy back of Shares.The company always buys the stock at a much higher price from company investor.This process is done by the company's management.

Reasons for buyback of shares

When does the company take decision of Buy back of Shares

When the company accumulates a lot of profit cash and does not invest that profit in the company expansion or invest in new machinery or anything, it shares its profit through its buy back of share and dividend from its shareholder.The company has bought shares from shareholders at higher price.

Who can apply for Share buy back 

Anyone can apply to the share buyback,who owns the shares of that company,just before the record date, that shareholder should have shares.The record date is the one on which the company announces the buyback of shares.

How to Buyback of Shares

Buyback of Shares apply through tender.You can apply this in three ways.

1.)From your broker

2.)From Company website

3.)Company buy back email,the company sends an email to all its share holders, which contains a tender form, which you can fill and apply for it.

After the Buyback, the company transfers their money to the shareholder in their bank account. If your share is not Buyback  then they reverse  to the Demat account.

Condition for Buyback of Shares

Any shareholder can apply for a buyback from a demat account, means if he has 4 demat  accounts, all of them have shares of that company, then he will be able to apply for buyback from any one account.

Why does the company buy back 

When the company sees that the rate of shares in the market is falling too much and the market shareholder has a lot of shares of the company, company buy back of shares so that all the outstanding shares in the market come back in company and in the market, the shares quantity of that company decrease and the demand for those shares increases due to which their rates start increasing.This benefits to the investor.

According to me, if the company's share price increases, then the investor should not participate in the buy back as it will not benefit much but at the time when the shares of the company have fallen and the company brings the Buy back, then you must apply this is profitable deal.

Hope you understand this article,What is Buyback of shares?if there is any question related to this article, then you can ask and comment.

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