How is buyback of shares done?

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Buyback of shares is done out of the free reserves of the company. As a first step, the company desiring to go for buyback needs to approve the buyback proposal in the board meeting and decide on the mode of the buyback.

Post the buyback proposal is approved, the below sequence is followed to complete the buyback.

  1. The company makes the public announcement mentioning the mode of buyback.
  2. The company issues a letter of offer and Tender form. (applicable in case of a tender offer)
  3. Interested shareholders approach their stockbrokers to tender their shares for buyback or put their bid for buyback in case of an open market offer.
  4. The stockbrokers then submit the tender forms and other applicable documents to the company registrar and also places a bid in case of a tender offer.

    In case of an open offer, the stock broker places a sell order against the buy order placed by the company for the buyback.
  5. The registrar verifies the tender forms and informs the exchanges on acceptance/non-acceptance of the tendered Equity shares.

    The acceptance of the shares in an open market offer happens based on order matching and gets executed on relevant pay-out dates.
  6. The shareholder receives due consideration in return for the accepted shares.
  7. As the last step, the company destroys the shares purchased by them within a stipulated timeframe.


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