Buybacks are suppose to enhance the shareholder value by decreasing the equity base. Such reduction boosts the return on equity and the price-to-earning ratio.
Share buyback refers to buying back its own shares by a company. In India comapnies can buyback their shares using the accumulated reserves they have.
Buybacks can be either (1) Tender offer or (2) Open market offer.
In tender offers the company commits itself to buyback fixed number of shares , it can be at a fixed price or auction based.
Auction based can again be either a book-building process or a reverse book-building process. In a book building process the process starts from the highest bidder. In the reverse book building it starts from the lowest bidder. In both the cases the cut-off point is where the quota of the shares to be bought has exausted.
Under Open market buybacks the company announces a "maximum price" limit for re-purchasing of its shares. It has no commitment. Hence at what price, date, and quantity of shares will be bought is at company's discretion.
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