Year-Ender: 2022 sees 170% rise in share buybacks — Zee Business research analyst decodes trend

Share buyback 2022: The share buyback trend saw a 170 per cent rise year-on-year in 2022 as 58 companies announced buyback offers worth Rs 38,700 crore,  as compared to 42 and 55 companies in 2021 and 2020, respectively, as per Zee Business Research Analyst Arman Nahar. 

Of these 58 firms, 35 of them launched buyback offers through the tender route, the analyst said.  

Interestingly, there was a huge difference between the open route buyback offer and the actual buyback amount this year, Nahar said, explaining that this is mainly because the prices set by companies for buyback through the open market were at a higher level than the actual price. 

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For example, Paytm, which announced a buyback earlier in December 2022, has set a buyback price of Rs 810 per share — which is 50 per cent higher than its actual price, Nahar said in his report.  

The combined buyback offers through the open route announced by the companies stood at Rs 15195 crores. However, only Rs 4230 crore of share buyback took place, the analyst noted, adding that this difference was almost negligible in the previous two years 2021 and 2020.  

Earlier last week, the Securities and Exchange Board of India (SEBI) in a board meeting had decided to gradually phase out the buyback of shares by companies through the stock exchange route.  

SEBI Chairperson Madhabi Puri Buch said the regulator has chosen the tender offer route for share buyback as the present mode is vulnerable to favouritism, and added, "This is a glide path and will lead to the phasing out of the present buyback mode (through the stock exchange route).” 

On this, Nilesh Sharma, Executive Director, Samco Securities pointed out that the capital market regulator’s move to scrap stock exchange route in buyback is likely to benefit retail shareholders. “The tender route is extremely beneficial for the retail shareholder and phasing out the stock exchange route should be seen as a positive step for the retail shareholders,” he noted.