buy back shares buyback share buy back of equity shares in india

Benefits of share buy back

What is Share Buy back?
Share buy back is nothing but taking (purchase) shares back from market.

How companies buy back there shares?
·   Generally companies buy back shares at a premium to the current market
    price.
·   They can buy from share holders at a fixed price on a proportionate basis
    and they can even buy back open market.

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Why companies plan to buy back shares?
Following any one reason may apply,
a) To arrest/stop the fall in stock price.
b) In some situation company may want to bring down the public holding
    and increase promoters holding.
c) If the company sees there is no better opportunity to deploy its cash
    reserves then it may decide to buy back its shares.
d) The buy back may improve companies return ratios.

How share holders get benefited?
1. Buy back at good premium, may increase the stock price in share
    market.
2. As buy back of shares reduces outstanding shares, the EPS (EPS is
    calculated by dividing net profit by outstanding shares) may look good.
    The ROA (Return on Asset) and ROE (Return on Equity) may improve
    by fall in outstanding shares and assets (in this scenario, excess cash).