Definition
Buyback (Tender vs Open Market)
A buyback can happen via a tender offer (proportionate, at a fixed price) or through open-market purchases on the exchange over time.
In a tender buyback, the company offers to buy back a fixed number of shares at a set price, usually above market, with a reserved quota for small shareholders; you tender your shares and get accepted proportionately. In an open-market buyback, the company buys shares on the NSE/BSE at prevailing prices over a period.
Tender offers often give a near-certain premium to small shareholders, while open-market buybacks support the price without guaranteed acceptance. Note: from October 2024, buyback proceeds are taxed in shareholders' hands as deemed dividends, changing their tax appeal.
Related terms
- Dividend Distribution & TaxationSince 2020, dividends are taxed in the shareholder's hands at their income-tax slab rate, with TDS deducted by the company above a threshold.
- BuybackA buyback is when a company repurchases its own shares from the market, reducing the number of shares outstanding.
- Offer for Sale (OFS)An OFS is the route through which existing shareholders sell their shares to the public — either as part of an IPO or via a separate exchange mechanism — with proceeds going to them rather than the company.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.