Share of buybacks via exchange up in 2022

In 2022, 23 out of 58 companies that have chosen to buy back their shares have used this route. This includes ongoing offers and represents a 40% share, the highest in three years and the second-highest since 2014. Stock exchanges were once a popular buyback route. In the past 22 years, nearly 50% of buybacks have been through the open market route, with only one instance using book-building. Between 2006 and 2012, almost all buybacks were through the stock market, and even the contribution in terms of amount offered was nearly 100%. The share of buybacks via this route has sharply fallen.

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In 2021, only 12 out of 42 issues were through the open market, against a 40% share in 2020. That said, the stakes in terms of the amount offered were completely reversed: 71% in 2021 versus 16% in 2020.

Companies can buy back shares through open market, tender offer and book-building. “The tender route is a more favoured and fair route for a buyback as the price is pre-determined and shareholders get an equal opportunity to participate while in the open market route, while the maximum price is announced, the buyback happens at a much lower price,” said Pranav Haldea, MD, Prime Database Group.