BUYBACK OF SHARES

Subject: Financial Accounting – V

Academic Year: 2026–27

Name: Mohd Daneeyal Mohammed Ayub Ansari

Class: [Link] (Accounting & Finance)
Divison/Roll No.: B/81
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Introduction to Buyback of Shares

Buyback of shares, also known as share repurchase, refers to the process by which a company
purchases its own shares from its existing shareholders. When a company buys back its shares,
those shares may be cancelled or held as permitted under applicable laws, thereby reducing the
number of shares available in the market. Buyback is an important corporate financial decision
and is generally undertaken when a company has surplus cash, wants to improve its capital
structure, or wishes to return excess funds to its shareholders.

A company may choose to buy back its shares for several reasons. One of the major objectives
is to provide an alternative method of returning surplus funds to shareholders instead of paying
dividends. A buyback can also improve Earnings per share (EPS) because the number of
outstanding shares may decrease while the company's earnings remain unchanged. This can
make the company's financial performance appear stronger on a per-share basis. Companies
may also undertake buybacks when management believes that the company's shares are
undervalued in the market.

In India, buyback of shares is governed mainly by the Companies Act, 2013, along with
regulations prescribed by the Securities and Exchange Board of India (SEBI) for listed
companies. The law specifies various conditions, limits, procedures, and disclosure
requirements that companies must follow while conducting a buyback. A company cannot
undertake a buyback without complying with the prescribed legal requirements and obtaining
the necessary approvals.

There are different modes of buyback, such as buying shares from existing shareholders
through a tender offer and purchasing shares through the open market, subject to the applicable
regulatory framework. A buyback may also be funded through sources such as free reserves,
securities premium account, or proceeds of certain securities, as permitted by law. However, a
company generally cannot use the proceeds of an earlier issue of the same kind of shares or
securities to finance the buyback, subject to statutory provisions.

Buyback can benefit shareholders by providing them with an opportunity to sell their shares,
potentially at an attractive price. For the company, it can help optimize the capital structure and
utilize surplus funds efficiently. However, buyback also involves risks, such as reduction in
available cash and the possibility of affecting the company's financial flexibility.

Thus, buyback of shares is an important tool of corporate financial management. When

planned and executed properly within the legal framework, it can help a company manage its
surplus funds and enhance shareholder value while maintaining an appropriate balance between
equity and other sources of finance.
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Meaning of Buyback of Shares

Buyback of shares refers to the process by which a company purchases its own shares from its
existing shareholders. In simple words, when a company buys back shares, it uses its available
funds to repurchase a portion of the shares that it had previously issued. The shares acquired
through buyback are generally cancelled or dealt with in accordance with the applicable legal
and regulatory provisions. As a result, the number of outstanding shares of the company may
decrease.

A buyback is an important financial decision because it affects the company's capital structure,
ownership pattern, earnings per share, and utilization of funds. Companies generally consider
buyback when they have sufficient surplus cash or when they believe that their shares are
undervalued in the market. It provides shareholders with an additional opportunity to receive
money from the company apart from regular dividends.

In India, buyback of shares is regulated primarily under the Companies Act, 2013, along with
applicable regulations of the Securities and Exchange Board of India (SEBI) for listed
companies. The company must comply with prescribed conditions, limits, approvals,
disclosure requirements, and other legal procedures before undertaking a buyback.

Objective of Buyback of Shares

The major objectives of buyback of shares are as follows:

1. Utilisation of Surplus Cash:

A company may use excess cash for buying back its shares instead of keeping idle funds
or distributing the entire amount as dividends.
2. Enhancing Earnings Per Share (EPS):
Since buyback can reduce the number of outstanding shares, earnings may be distributed
over fewer shares, which can increase EPS, assuming other factors remain constant.
3. Improving Shareholder Value:
Buyback can provide shareholders with an opportunity to sell their shares and receive
cash from the company. It may also support shareholder value when the market price
does not reflect the company's perceived value.
4. Optimising Capital Structure:
Buyback can help a company maintain an appropriate balance between equity and other
sources of finance and may reduce excess equity capital.
5. Providing an Alternative to Dividend:
Companies can use buyback as another method of distributing surplus funds to
shareholders, particularly when a permanent increase in dividend payments is not
considered appropriate.
6. Supporting Market Price:
A company may undertake a buyback when it believes its shares are undervalued.
Reduced supply of shares may also influence market demand and price, subject to market
conditions.
7. Consolidating Ownership:
Buyback can reduce the number of shares held by the public or other shareholders,
potentially increasing the relative ownership percentage of shareholders who continue to
hold their shares.
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Legal Provisions under the Companies Act, 2013

The Companies Act, 2013 provides a legal framework for companies intending to buy back
their own shares or specified securities. The main provisions relating to buyback are contained
in Sections 68, 69 and 70 of the Act, along with the applicable rules and regulations. These
provisions are designed to ensure that buyback transactions are carried out in a fair, transparent
and regulated manner while protecting the interests of shareholders and creditors.

1. Sources of Funds

Under Section 68, a company may finance the buyback out of:

 Free reserves;
 Securities premium account; or
 Proceeds of an earlier issue of shares or specified securities.

However, buyback cannot be made out of the proceeds of an earlier issue of the same kind of
shares or specified securities.

2. Approval for Buyback

A company may buy back its shares only if the necessary approval is obtained. Generally, the
buyback must be authorised by the Articles of Association of the company. Depending upon
the amount and circumstances of the buyback, approval may be required from the Board of
Directors or through a special resolution of shareholders, as prescribed under the Act and
applicable rules.

3. Maximum Limit

The Companies Act places a limit on the amount that can be used for buyback. The buyback
should be within the prescribed percentage of the company's paid-up capital and free
reserves, subject to the conditions specified under Section 68.

4. Conditions Regarding Outstanding Obligations

A company proposing a buyback is required to comply with prescribed conditions relating to

its existing financial obligations. The company must also ensure that it is capable of meeting
its liabilities after completing the buyback.

5. Fully Paid-Up Shares

Only fully paid-up shares or specified securities can be bought back under the provisions
of the Act.

6. Declaration of Solvency

Before undertaking a buyback, the company is required to file a declaration of solvency,

signed by the prescribed directors, stating that the company is capable of meeting its
liabilities and will not become insolvent as a result of the buyback.
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7. Cancellation of Bought-Back Shares

The shares or securities bought back by the company must generally be extinguished and
physically destroyed within the period prescribed under the Act and applicable rules.

8. Restrictions on Further Issue

After completing a buyback, the company is subject to restrictions on issuing the same kind
of shares or securities for a prescribed period, except in specified circumstances permitted by
law.

9. Prohibition of Buyback in Certain Circumstancess

Under Section 70, a company is prohibited from buying back its shares in certain situations,
including specified defaults relating to repayment of deposits, interest, debentures, preference
shares, or certain other obligations, subject to the exceptions and conditions provided under
the Act.

Thus, the Companies Act, 2013 establishes a comprehensive framework to regulate buyback
transactions and ensure that they are conducted responsibly, transparently and without
adversely affecting the financial interests of the company, shareholders and creditors.
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Modes of Buyback of Shares

In India, a company can buy back its shares through different modes permitted under the
Companies Act, 2013 and, for listed companies, the applicable SEBI regulations. The main
modes are:

1. Buyback Through Tender Offer

Under this method, the company makes an offer to existing shareholders to purchase a specified
number of shares at a predetermined price. Shareholders can choose whether to participate in
the buyback by tendering their shares. In a listed company, the offer is generally made to
shareholders on a proportionate basis, subject to the applicable regulations.

Example: If a company announces a buyback at ₹500 per share, eligible shareholders can offer
their shares to the company at that price.

2. Buyback Through Open Market

Under the open-market method, the company purchases its own shares through the stock
exchange. The company does not directly approach individual shareholders. Instead, shares are
purchased from the market at prevailing market prices, subject to the applicable legal and
regulatory requirements.

This method provides flexibility because the company can purchase shares over a period rather
than acquiring them all at once.

3. Buyback from Existing Security Holders on a Proportionate Basis

The company may offer to purchase shares from existing shareholders in proportion to their
existing holdings, subject to the conditions prescribed under the Companies Act and applicable
regulations. This approach aims to provide shareholders with an opportunity to participate in
the buyback according to their shareholding.

4. Buyback from Employees

In certain circumstances, buyback may be carried out from employees holding shares or
specified securities, including shares issued under employee stock option schemes or sweat
equity, subject to the applicable legal provisions.

Conclusion

Thus, the major modes of buyback include tender offer and open-market purchase, with
specific procedures applicable to each method. The choice of method depends on the
company's objectives, financial position, shareholding pattern and regulatory requirements.
Regardless of the method selected, the company must comply with the provisions of the
Companies Act, 2013 and, where applicable, SEBI regulations.
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Conditions and Eligibility for Buyback of Shares

The Companies Act, 2013 lays down several conditions that a company must satisfy before
undertaking a buyback of its own shares or specified securities. These conditions are intended
to protect shareholders, creditors and the financial stability of the company.

1. Authorisation in Articles of Association

The company's Articles of Association (AOA) must authorise the buyback of shares. If the
AOA does not contain such a provision, it must be amended before proceeding with the
buyback.

2. Approval of the Board or Shareholders

A buyback can be approved by the Board of Directors within the prescribed limit. Where the
proposed buyback exceeds the limit permitted for Board approval, a special resolution of
shareholders is required, subject to the provisions of the Act and applicable regulations.

3. Maximum Limit

The amount used for buyback must remain within the limits prescribed under Section 68 of
the Companies Act, 2013. The applicable limit depends on the company's paid-up capital and
free reserves.

4. Fully Paid-Up Shares

Only fully paid-up shares or specified securities can be bought back by a company.

5. Sources of Funds

The company can finance the buyback from:

 Free reserves;
 Securities premium account; or
 Proceeds of an earlier issue of shares or specified securities, subject to the restrictions
prescribed by law.

6. Declaration of Solvency

Before making a buyback, the company is required to make a declaration of solvency in the
prescribed form. The declaration confirms that the company is capable of meeting its liabilities
and will not become insolvent as a result of the buyback.

7. Debt-Equity Ratio

After completing the buyback, the company's debt-to-equity ratio should generally not exceed
the prescribed limit, subject to exceptions provided under the law.
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8. No Default in Repayment

A company should not have certain specified defaults relating to repayment of deposits,
interest, debentures, preference shares, loans from financial institutions or other obligations.
The applicable provisions also specify circumstances in which a company may become eligible
again after rectifying the default.

9. Extinguishment of Shares

Shares purchased through the buyback must generally be extinguished and physically
destroyed within the period prescribed under the Act.

10. Cooling-Off Period

After completing a buyback, the company is generally restricted from making another buyback
offer for one year, subject to the provisions and exceptions under the Act.

Conclusion

Therefore, buyback is not an unrestricted right of a company. It can be undertaken only when
the company satisfies the prescribed legal, financial and procedural conditions. These
requirements ensure that the buyback does not adversely affect the company's ability to meet
its financial obligations and protects the interests of its stakeholders.
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Sources of Buyback of Shares

The Companies Act, 2013, particularly Section 68, specifies the sources from which a
company can finance the buyback of its own shares or specified securities. The main purpose
of these provisions is to ensure that the company uses legally permitted funds and does not
adversely affect the interests of creditors and shareholders.

1. Free Reserves

A company can use its free reserves to finance the buyback of shares. Free reserves are
reserves that are available for distribution as dividends, subject to applicable provisions of law.
Using surplus free reserves allows a company to return excess funds to shareholders when it
does not have an immediate requirement for those funds.

2. Securities Premium Account

The company can also use the balance available in its securities premium account for
buyback. Securities premium generally arises when shares are issued at a price higher than
their face value. The Companies Act permits this account to be utilised for specified purposes,
including buyback, subject to the prescribed conditions.

3. Proceeds of an Earlier Issue

Buyback may also be financed from the proceeds of an earlier issue of shares or specified
securities. However, an important restriction applies: a company cannot use the proceeds of
an earlier issue of the same kind of shares or specified securities to finance their buyback.

For example, if a company has issued equity shares and subsequently wants to buy back those
equity shares, it cannot finance that buyback using the proceeds of an earlier issue of the same
kind of equity shares.

Important Point

The source of funds is different from the mode of buyback. Sources explain where the money
for the buyback comes from, whereas modes explain how the company purchases its
shares. For example, a company may finance a tender-offer buyback using its free reserves.

Conclusions

Thus, under Section 68 of the Companies Act, 2013, the principal sources of buyback are:

Free Reserves + Securities Premium Account + Proceeds of an Earlier Issue (subject to

restrictions).

These provisions help ensure that companies conduct buybacks using legally permitted funds
while maintaining adequate financial stability.
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Accounting Entries for Buyback of Shares

The accounting treatment of buyback of shares is mainly governed by the provisions of the
Companies Act, 2013 and applicable accounting principles. When a company buys back its
own shares, the transaction affects share capital, reserves, securities premium, and cash/bank
balances.

The important journal entries are as follows:

1. When the Amount Payable on Buyback is Recorded

When the company becomes liable to pay shareholders for the shares bought back:

Journal Entry:

Equity Share Capital A/c Dr.

Premium on Buyback A/c Dr.
To Equity Shareholders A/c

The face value of the shares is debited to the Equity Share Capital Account, while any
amount paid above the face value is treated as premium on buyback.

2. Payment to Shareholders

When payment is made to shareholders:

Equity Shareholders A/c Dr.

To Bank A/c

This entry records the actual payment made by the company to shareholders whose shares
have been bought back.

3. Adjustment of Premium on Buyback

If the buyback involves payment of a premium, the premium may be adjusted against
permissible sources such as the Securities Premium Account or other reserves, as allowed
under the applicable provisions.

Securities Premium A/c Dr.

or
Free Reserves A/c Dr.
To Premium on Buyback A/c
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4. Transfer to Capital Redemption Reserve

Under Section 69 of the Companies Act, 2013, where shares are bought back out of free
reserves or securities premium, an amount equal to the nominal value of the shares bought
back is transferred to the Capital Redemption Reserve (CRR).

Free Reserves / Securities Premium A/c Dr.

To Capital Redemption Reserve A/c

This transfer helps maintain the company's capital base and protects creditors.

5. Cancellation of Bought-Back Shares

Once the shares bought back are extinguished, the corresponding share capital is cancelled
through the relevant accounting entry.

Example

Suppose a company buys back 10,000 equity shares of ₹10 each at ₹15 per share.

 Face value = ₹1,00,000

 Premium = ₹50,000
 Total buyback consideration = ₹1,50,000

The basic entry would be:

Equity Share Capital A/c Dr. ₹1,00,000

Premium on Buyback A/c Dr. ₹50,000
To Equity Shareholders A/c ₹1,50,000

Afterwards:

Equity Shareholders A/c Dr. ₹1,50,000

To Bank A/c ₹1,50,000

If the buyback is financed from eligible free reserves or securities premium, ₹1,00,000 (the
nominal value) would be transferred to the Capital Redemption Reserve, subject to the
applicable provisions.

In short: The accounting entries for buyback record the reduction in share capital, payment
to shareholders, adjustment of buyback premium, and creation of Capital Redemption
Reserve where required.
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Practical Case Study

Buyback of Shares by Bajaj Auto Ltd.

1. Introduction
Bajaj Auto Ltd. announced a significant share buyback in 2026 as part of its capital-allocation
strategy. The company's Board approved the buyback proposal on 6 May 2026, which was
subsequently approved by shareholders through a postal ballot on 18 June 2026. The Buyback
Committee fixed 24 June 2026 as the record date for determining the shareholders eligible to
participate in the offer.

The proposed buyback provides a practical example of how a large and profitable company
can return surplus capital to its shareholders while managing its equity structure.

2. Key Details of the Buyback

Particular Details

Company Bajaj Auto Ltd.

Buyback Year 2026

Record Date 24 June 2026

Buyback Size Approximately ₹5,632.80 crore

Buyback Price ₹12,000 per equity share

Number of Shares Up to 46.94 lakh equity shares

Face Value ₹10 per share

Method Tender Offer

Payment Cash

Shareholder Approval 18 June 2026

Bajaj Auto proposed to buy back up to 46.94 lakh fully paid-up equity shares having a face
value of ₹10 each at a price of ₹12,000 per share. The maximum total buyback consideration
was approximately ₹5,632.80 crore.
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3. Calculation of Buyback Consideration

The total buyback consideration can be calculated as:

Number of shares × Buyback price

= 46.94 lakh × ₹12,000

= ₹5,632.80 crore

The nominal value of the shares bought back is:

46.94 lakh × ₹10

= ₹4.694 crore

Therefore, the premium involved in the buyback is:

₹5,632.80 crore − ₹4.694 crore

= ₹5,628.106 crore

4. Record Date and Eligibility

The record date of 24 June 2026 was fixed to determine the shareholders and beneficial
owners eligible to participate in the buyback. The buyback was structured as a tender offer,
under which eligible shareholders could tender their shares at the announced buyback price,
subject to the applicable terms and acceptance conditions.

5. Accounting Treatment and Journal Entries

The accounting treatment of the buyback involves recording the cancellation of share capital,
the premium payable on buyback, payment to shareholders and the transfer to Capital
Redemption Reserve, wherever applicable.

1. Recording Amount Payable to Shareholders

The face value of the shares bought back is ₹4.694 crore and the premium is ₹5,628.106
crore.

Equity Share Capital A/c Dr. ₹4.694 crore

Premium on Buyback A/c Dr. ₹5,628.106 crore
To Equity Shareholders A/c ₹5,632.800 crore

Explanation:
The Equity Share Capital Account is debited with the nominal value of the shares bought
back. The premium payable over and above the face value is recorded separately.
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2. Payment to Shareholders

When the company makes payment to shareholders:

Equity Shareholders A/c Dr. ₹5,632.800 crore

To Bank A/c ₹5,632.800 crore

Explanation:
This entry records the payment of the buyback consideration to shareholders whose shares
have been accepted for the buyback.

3. Adjustment of Premium on Buyback

The premium on buyback may be adjusted against eligible reserves, subject to the applicable
provisions:

Securities Premium / Eligible Reserves A/c Dr. ₹5,628.106 crore

To Premium on Buyback A/c ₹5,628.106 crore

Explanation:
The premium payable on the buyback is adjusted against an eligible source as permitted
under the applicable accounting and legal provisions.

4. Transfer to Capital Redemption Reserve

Where the buyback is made out of free reserves or securities premium, an amount equal to
the nominal value of the shares bought back is transferred to the Capital Redemption
Reserve, as required under Section 69 of the Companies Act, 2013.

General Reserve / Securities Premium A/c Dr. ₹4.694 crore

To Capital Redemption Reserve A/c ₹4.694 crore

Explanation:
The transfer to Capital Redemption Reserve helps maintain the company's capital protection
framework after the reduction in paid-up share capital.

6. Summary of the Case

Particular Amount

Number of shares proposed to be bought back 46.94 lakh

Face value per share ₹10

Buyback price per share ₹12,000

Total face value ₹4.694 crore

Total buyback consideration ₹5,632.800 crore

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Particular Amount

Premium on buyback ₹5,628.106 crore

CRR transfer, if applicable ₹4.694 crore

7. Significance of the Buyback

The Bajaj Auto buyback demonstrates how a financially strong company can use surplus
funds to return capital to shareholders. Since the buyback reduces the number of outstanding
shares, it may improve Earnings Per Share (EPS) if the company's earnings remain constant
and other factors do not change.

For shareholders, the buyback provides an opportunity to tender their shares at the announced
price. For Bajaj Auto, it represents a significant capital-allocation decision and may help
optimise its equity structure.

8. Conclusion
The 2026 Bajaj Auto Ltd. share buyback is a useful practical example for understanding
the process of buyback under the Indian corporate and regulatory framework. With a
proposed buyback of approximately ₹5,632.80 crore, at ₹12,000 per share, and a record date
of 24 June 2026, the case demonstrates the importance of shareholder approval, eligibility,
tender procedures, financial calculations and accounting treatment in a large-scale share
buyback.

The journal entries further illustrate how the transaction affects share capital, buyback
premium, bank balance and Capital Redemption Reserve, providing a practical
understanding of the accounting aspects of share buyback.
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Advantages and Disadvantages

Advantages Disadvantages
1. Enhances Shareholder Value: Buyback
1. Reduction in Cash Reserves: A large
may increase the value of the remaining
amount of company funds may be used for
shares and provides shareholders an
buyback, reducing cash available for future
opportunity to sell their shares to the
needs.
company.
2. Improves EPS: Reduction in outstanding
2. Risk of Overvaluation: Buying back
shares may increase Earnings Per Share
shares at an unnecessarily high price may
(EPS), assuming other factors remain
lead to inefficient use of company funds.
constant.
3. Utilises Surplus Funds: Excess cash can 3. May Increase Financial Risk: If debt is
be returned to shareholders instead of used to finance the buyback, the company's
remaining idle. financial obligations may increase.
4. Unequal Benefit: Shareholders who
4. Optimises Capital Structure: Buyback
participate receive cash, while non-
can help reduce excess equity and create a
participating shareholders may experience
more efficient capital structure.
changes in their relative ownership.
5. Alternative to Dividend: Buyback 5. Possible EPS Manipulation: EPS may
provides another method of distributing increase simply because the number of shares
surplus funds without creating a permanent has decreased, even without an improvement
dividend commitment. in operating performance.
6. Signals Management Confidence: A 6. Reduction in Equity Capital: Buyback
buyback may indicate that management reduces share capital and may affect the
considers the company's shares undervalued. company's financial flexibility.
7. Increases Relative Ownership:
7. Regulatory Compliance: Buyback
Shareholders who retain their shares may see
involves legal procedures, approvals,
their percentage ownership increase after the
disclosures and compliance costs.
buyback.
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Recent Trends in Buyback of Shares in India

The Indian buyback market has remained an important part of corporate capital allocation,
particularly among companies with strong cash flows and limited immediate need for surplus
funds. Recent regulatory changes have also influenced how companies and shareholders view
buybacks.

Trend Explanation

Indian companies continue to use buybacks as a way of returning surplus cash

1. Increasing Use to shareholders. Recent SEBI filings show buyback activity across companies
of Buybacks such as Cyient, Windlas Biotech, GO Fashion and eClerx Services. (Securities
and Exchange Board of India)

Companies with strong cash positions are increasingly considering substantial

buybacks. The size of a buyback can represent a significant proportion of paid-
2. Large Buyback up capital and free reserves, subject to the statutory limits. For example,
Programmes Cyient's 2026 buyback was ₹720 crore, representing 20.31% of its paid-up
capital and free reserves on a standalone basis. (Securities and Exchange
Board of India)

3. Tender Offer The tender offer route continues to be used by listed companies. Recent SEBI
Remains documents for Windlas Biotech and Cyient show buybacks being undertaken
Important through tender offers. (Securities and Exchange Board of India)

Companies are increasingly using buybacks alongside dividends as part of their

4. Greater Focus
overall shareholder-return strategy. Buybacks can provide flexibility because
on Shareholder
companies can return surplus capital without necessarily creating a permanent
Returns
dividend commitment.

A major recent development is the change in the tax treatment of buybacks.

From 1 April 2026, buyback proceeds are generally treated as capital gains in
5. Tax Treatment
the hands of shareholders, rather than being taxed through the earlier
Has Changed
buyback-tax mechanism. This makes the tax treatment more similar to
ordinary market transactions. (Securities and Exchange Board of India)

6. Regulatory SEBI has continued to refine the buyback framework. Recent regulatory
Framework material discusses the re-introduction of the open-market buyback route
Continues to through stock exchanges, alongside changes to the taxation framework.
Evolve (Securities and Exchange Board of India)

Companies are increasingly looking at buybacks as a way to optimise their

7. Buybacks Used
capital structure and deploy funds that may otherwise remain surplus. A
for Capital
reduction in outstanding shares can also improve EPS, assuming earnings and
Optimisation
other factors remain unchanged.
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Trend Explanation

Buybacks remain subject to statutory limits, shareholder approvals, disclosures

8. Continued
and other regulatory requirements. Recent SEBI offer documents demonstrate
Importance of
the detailed compliance and disclosure involved in conducting buybacks.
Compliance
(Securities and Exchange Board of India)

Overall Trend

The recent trend in India indicates that buyback is becoming an increasingly important tool
for efficient capital management and shareholder returns. Companies with strong cash
generation are using buybacks to distribute surplus funds, while regulatory and tax changes are
reshaping the attractiveness and structure of these transactions. The 2026 tax changes, in
particular, represent an important development because buyback proceeds are now generally
taxed as capital gains in the hands of shareholders. (Securities and Exchange Board of India)

Yes. For your project, a simple trend chart can be added after the “Recent Trends in Buyback
in India” table. Since the trend is about the changing importance of buybacks rather than a
single official annual dataset, it is better to use a conceptual trend chart rather than inventing
yearly buyback figures.

Interpretation of the Chart

The chart highlights the major areas shaping the recent buyback environment in India. The
strongest developments are related to shareholder returns, capital optimisation, regulatory
changes and tax treatment. Companies are increasingly viewing buybacks as an important
tool for deploying surplus funds, while changes in regulations and taxation continue to
influence how buybacks are structured and implemented.

Recent Trends in Share Buyback in India

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Conclusion

Buyback of shares is an important financial strategy through which a company purchases its
own shares from existing shareholders. It enables companies to utilise surplus funds, optimise
their capital structure and provide an alternative method of returning capital to shareholders. A
properly planned buyback can also reduce the number of outstanding shares and potentially
improve Earnings Per Share (EPS).

The Companies Act, 2013, particularly Sections 68, 69 and 70, provides a comprehensive
legal framework for conducting buybacks in India. Companies are required to comply with
various conditions relating to sources of funds, approvals, solvency, limits, fully paid-up
shares, extinguishment of shares and Capital Redemption Reserve. Listed companies must also
comply with applicable SEBI regulations and disclosure requirements.

The practical case study of Bajaj Auto Ltd. demonstrates how buyback operates in a real
corporate situation. Its 2026 buyback proposal, involving approximately ₹5,632.80 crore at
₹12,000 per share, illustrates the use of buyback as a significant capital-allocation tool. The
accounting treatment further shows the impact of buyback on share capital, buyback premium,
bank balances and Capital Redemption Reserve.

Although buyback offers several advantages, such as improving shareholder value, utilising
surplus cash and potentially increasing EPS, it also has disadvantages. Excessive use of funds
for buyback can reduce financial flexibility and limit the company's ability to invest in future
growth. Therefore, a buyback decision should be based on the company's financial position,
investment opportunities, shareholder interests and applicable legal requirements.

Overall, buyback of shares is an effective corporate financial management tool when

undertaken responsibly. The recent developments in India indicate that buybacks continue to
play an important role in shareholder returns and capital management, while regulatory and
taxation changes are continuing to shape the buyback environment.

Bibliography / References
1. Ministry of Corporate Affairs (MCA) – Companies Act, 2013
Companies Act, 2013 – MCA
2. India Code – Companies Act, 2013
India Code – Companies Act, 2013
3. SEBI – Buy-back of Securities Regulations, 2018
SEBI Buy-back Regulations, 2018
4. SEBI – Buy-back Regulations, 2018 (Original Regulations)
SEBI Buy-back Regulations, 2018
5. SEBI – Buy-back Regulations FAQs
SEBI Buy-back FAQs
6. SEBI Investor – Buyback of Shares
SEBI Investor – Buyback of Shares
7. SEBI – Buy-back Regulations Amendment, May 2024
SEBI Amendment Regulations, May 2024
8. SEBI – Second Amendment to Buy-back Regulations, 2024
SEBI Second Amendment Regulations, 2024
 20

9. SEBI – Buy-back Regulations, 2018 – May 2024 Version

SEBI Regulations – May 2024
10. SEBI – Consultation Paper on Review of Buy-back Regulations
SEBI Consultation Paper on Buy-back Regulations
11. SEBI – Buy-back Regulations – Official Regulatory Page
SEBI Regulatory Framework
12. Bajaj Auto Ltd. – Share Buyback 2026
Bajaj Auto – Share Buyback 2026
13. Bajaj Auto Ltd. – Investor Relations
Bajaj Auto Investor Relations
14. Bajaj Auto Ltd. – Annual Reports
Bajaj Auto Annual Reports
15. Bajaj Auto Ltd. – Financial Results
Bajaj Auto Financial Results
16. Bajaj Auto Ltd. – Corporate Announcements
Bajaj Auto Corporate Announcements
17. Bajaj Auto Ltd. – Share Buyback 2026 Documents
Bajaj Auto Buyback Documents
18. National Stock Exchange of India (NSE)
NSE India
19. BSE India – Bombay Stock Exchange
BSE India
20. Ministry of Finance – Government of India
Ministry of Finance, Government of India
21. Income Tax Department – Government of India
Income Tax Department
22. Reserve Bank of India (RBI)
Reserve Bank of India
23. SEBI – Official Website
Securities and Exchange Board of India
24. Ministry of Corporate Affairs – Official Website
Ministry of Corporate Affairs
25. SEBI Investor Education Portal
SEBI Investor Education
26. SEBI – Historical Buy-back Regulations
SEBI Historical Buy-back Regulations