Buyback of shares

India's largest software services firm TCS on Monday said its Board has approved a share buyback plan of up to Rs 16,000 crore. The Tata Group company said the proposed shares represent 2.85 per cent of the total paid up equity share capital at Rs 2,850 per equity share. Infosys has also announced that it will take decision on buyback at an appropriate time.

The statement comes at a time when Indian IT companies are under increasing pressure from investors to look at utilising large amounts of cash on their books either through share buyback or generous dividend. Share repurchase (or stock buyback) is the re-acquisition by a company of its own stock. It represents a more flexible way (relative to dividends) of returning money to shareholders.

A company may buyback its shares without shareholders’ resolution, to the extent of 10% of its paid up equity capital and reserves. However, if a company intends to buyback its shares to the extent of 25% of its paid up capital and reserves/ then the same has to be approved by Shareholders Resolution as specified in Section 77 A of Companies Act, 1956.

Even if one is not a registered shareholder, one can take part in buyback. In case the shares of the company are tradable compulsorily in demat segment, the acceptances from any investor shall be on a proportionate basis irrespective of the number of shares tendered in the buyback, and irrespective of whether shares are in physical or demat form.

If the shares are not in compulsory demat segment, first the entire shares tendered being less than the minimum market lot shall be accepted in full. Thereafter, the acceptances will be on proportionate basis in a manner to ensure that the acceptances are in market lot. In such a case, a draw of lots shall be done, as in the case of public issues. The company is required to send intimation to the tenderers within 15 days from the closure of the offer. The company is required to send the above, within 21 days from the closure of the buyback offer.