A lot of companies are exploring the arena of buyback these days and these include some big names like TCS as well. There can be certain reasons for a company to announce the buyback of their own shares, but the question here is, how to apply for buyback of shares? Are there any eligibility criteria?
Let us talk about this in detail in this article.
But before that, it is important to understand, what is the buyback of shares? So, when a company buys its own shares from either the open market or tender issue, it is known as the buyback of shares.
The purpose is to decrease the number of shares in the market, which often leads to a rise in share prices. Since, the company often repurchases the share at a premium, a lot of investors look to apply for the same.
Let us, therefore, have a look at the eligibility criteria first.
Who is Eligible For Buyback of Shares?
Like any other arena in the stock market, there are certain eligibility criteria to apply for buyback of shares. Before you move ahead and apply for the buyback of shares, you need to be sure whether or not you are eligible to do so. Some of the common criteria are as follows.
- You should have the shares of that particular company in your demat account.
- Another thing that you have to keep in mind is to have those shares on the record date. Every buyback of shares comes with a record date. For example, if a company issues a record date of May 25, 2021, then all the investors who would have purchased the shares till that date are eligible to apply for the buyback.
- It is not mandatory but beneficial if you have the shares according to the entitlement ratio. Let us understand this with an example. If the entitlement ratio of the buyback is 10:1, this means that for every 10 shares that you have of the company, there will be a buyback of 1 share. So make sure that you have that amount of shares in your account.
- A buyback ratio is also calculated by dividing the number of retail investors by the share’s current market price on that particular day.
Now that we know, who is eligible to apply for buyback of shares, let us have a look at the application process.
How to Sell Shares in Buyback?
If you fulfill all the eligibility criteria set by the company for the buyback of shares, then you can apply for the same through your demat account directly. Now, majority of the stockbrokers give you the right to participate in the buyback of shares across their trading platforms. You just have to raise a tender request and the rest can be preceded as per the rules.
You need to follow the given steps if you need to avail the advantages of buyback of shares.
- Login to your trading app (the demat account in which you have the shares of that particular company) with your login credentials.
- After this, you will see a dashboard. There can be various ways for different trading platforms, like in Zerodha you will see a tab of Corporate actions.
- Once you click on the same, you will see the shares available for the buyback.
- Now by filling in the details in this tender form you can easily apply of the buyback of shares.
- Fill in the number of shares that you want to tender and then click on submit.
- Some of the brokers also have an option to verify TPIN before you sell the shares.
In this way, you can easily apply for the buyback of shares from your online demat account. You will receive an acknowledgment slip from your broker.
Apart from this, if you apply for more shares than your eligibility criteria, the buyback totally depends on the decision of the company.
After you have successfully applied for the buyback of shares, the money will be credited directly to your bank account in case of acceptance.
There are many reasons for buyback of shares, and as discussed earlier that a lot of big companies are also thinking of doing the same. Therefore, if you want to avail the benefits and want to apply for the buyback of shares, you can easily do it through the trading platforms of your broker. You just have to make sure that you fulfill all the eligibility criteria.
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