With nearly 50 companies launching buyback offers, shares worth R34,468 crore were bought back in 2016-17, the highest in 19 years. IT major Wipro effected the biggest buyback by a private sector firm buying shares worth R2,500 crore in June 2016. The government chose to tap cash-rich PSUs to meet its divestment target and took back as much as R18,964 crore via buybacks. At R7,519 crore, NMDC’s buyback offer was the biggest. Other PSUs that bought back shares included MOIL, Nalco, NMDC, Coal India, Bharat Electronics, Coal India, NHPC and NLC. Late in the year, Oil India joined the long list of companies offering to buy back shares — the amount that the company allocated for this was R1,527.01 crore.
With the government levying an additional 10% tax on dividend income of more than R10 lakh, buybacks have become the preferred route for companies to return cash to shareholders. Many marquee names are set to launch their buyback offers in FY 18. Last month the board of Tata Consultancy Services, India’s largest IT company in terms of revenue and market capitalisation, approved a proposal to buy back shares worth R16,000 crore. This will be the biggest repurchase after Reliance Industries’ buyback worth R10,440 crore in 2012.
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TCS’ offer came a week after US-based software services player Cognizant Technology Solutions, which has centres in India, announced plans to buy back shares worth $3.4 billion. On March 15 the board of HCL approved the proposal to buyback for an amount of Rs 3,500 crore, for 3.5 crore shares. Buyback is the process by which a company repurchases its own shares from its stakeholders. The shares bought back are extinguished, resulting in a smaller equity base.