What is a share buyback? A plain-English guide
A share buyback is when a company buys back its own shares from its shareholders, returning cash to them and reducing the number of shares outstanding. In India it is governed by the SEBI (Buyback of Securities) Regulations, 2018. A buyback is the opposite of raising capital: instead of taking money in, the company pays money out to shrink its own equity base. Companies use the two routes SEBI allows, the tender offer and, historically, the open market route.
Definition
A share buyback
is a company repurchasing its own shares from shareholders, which returns cash to them and cuts the total shares outstanding. In India it runs under the SEBI (Buyback of Securities) Regulations, 2018, mainly through the tender offer route at a fixed price on a record date. Source: SEBI.
How does a share buyback work?
The company announces the buyback, its size, and its route, and files the details with the exchanges. In a tender offer, it fixes a price and a record date, and buys a set number of shares directly from shareholders who tender them, in proportion to their holding. SEBI reserves 15% of the buyback for small shareholders under this route. Once complete, the bought-back shares are extinguished, so the share count falls.
What is the maximum size of a buyback?
SEBI caps how much a company can repurchase.
25%
Maximum buyback as a share of paid-up capital plus free reserves
Source: SEBI (Buyback of Securities) Regulations, 2018
Why was the open market route phased out?
Companies used to run buybacks by buying shares on the exchange over time, the open market route. SEBI decided to phase it out because a single shareholder's sell order could get fully matched against the company's buy order, which meant other shareholders did not get an equal chance to participate. SEBI cut the maximum size allowed through the open market route in steps and discontinued it from April 1, 2025, per its 2023 amendment to the buyback regulations. The tender offer route, which treats shareholders proportionally, is now the main path.
Buyback vs offer for sale: opposite flows
A buyback is often confused with an offer for sale, but they move shares in opposite directions.
| Share buyback | Offer for sale (OFS) | |
|---|---|---|
| Who acts | The company | Promoters or large holders |
| Share flow | Company buys shares back | Holders sell shares out |
| Effect on count | Shares outstanding fall | Shares outstanding unchanged |
| Cash goes to | Shareholders who tender | The selling shareholders |
For a fuller comparison, see OFS vs buyback.
A buyback also shifts the shareholding pattern, because the total share count drops and the percentages recompute. Every step of a buyback, the announcement, the record date, the price, and the acceptance, is disclosed to the exchanges and dated.
Flock reads those public disclosures and keeps each one stamped with its date and source. What a buyback means for your own holding is your call to make.
Frequently asked questions
How does a share buyback work in India?
A company repurchases its own shares from shareholders, which returns cash to them and reduces the total shares outstanding. It is governed by the SEBI (Buyback of Securities) Regulations, 2018. The two routes are the tender offer and, historically, the open market. Source: SEBI.
What is the maximum size of a buyback?
A company cannot buy back more than 25% of its paid-up capital and free reserves in aggregate. The tender route also reserves 15% of the buyback for small shareholders. Source: SEBI (Buyback of Securities) Regulations, 2018.
Is the open market buyback route still allowed?
SEBI phased out the open market (stock exchange) buyback route, cutting its size limit in steps and discontinuing it from April 1, 2025. Buybacks now run mainly through the tender offer route. Source: SEBI, 2023 amendment.
What is the difference between a tender buyback and open market?
In a tender offer, the company buys a fixed number of shares at a fixed price directly from shareholders on a record date. The open market route, now discontinued, let the company buy shares on the exchange over time. Source: SEBI.
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Disclosures shown are public regulatory filings. Data may be delayed or incomplete. Smart-money entities may no longer hold positions shown. Not investment advice.