Share Buybacks in India: Tender Offer vs Open Market, Record Dates & Acceptance Ratio
A Share Buyback (or share repurchase) occurs when a cash-rich, profitable listed company repurchases its own outstanding shares from existing shareholders. Buybacks reduce the overall share capital, boost Earnings Per Share (EPS), enhance Return on Equity (RoE), and return surplus cash to shareholders at a premium above the prevailing market price.
1. Tender Offer vs Open Market Repurchase
| Feature | Tender Offer Buyback | Open Market Buyback |
|---|---|---|
| Mechanism | Company invites shareholders to tender shares at a fixed pre-announced price. | Company buys back shares dynamically from the open stock exchange over several months. |
| Offer Price | Fixed at a substantial premium (e.g. 15% to 40% above CMP). | Variable; company sets a maximum ceiling price and buys at live quotes. |
| Retail Quota | Mandatory 15% reservation for small/retail shareholders. | No retail reservation. |
| Record Date | Mandatory record date to determine entitlement and eligibility. | No record date for shareholders. |
| SEBI Preference | Standard modern mechanism favored by SEBI. | Being phased out under revised SEBI buyback regulations. |
2. The Retail Reservation Quota (The ₹2 Lakh Rule)
Under SEBI Buyback Regulations, a company launching a tender offer buyback MUST reserve at least 15% of the total buyback size exclusively for 'Small Shareholders':
- Who is a Small Shareholder? A shareholder whose total market holding value of that stock on the Record Date does not exceed ₹2,00,000 (calculated using the closing price on the exchange with highest trading volume).
- Why Retailers Love Buybacks: Because institutional investors cannot participate in the 15% retail bucket, small investors frequently enjoy significantly higher Acceptance Ratios (often 30% to 100%) when tendering shares!
3. Acceptance Ratio & Entitlement Ratio Formula
The Entitlement Ratio is the minimum guaranteed percentage of shares the company must buy from you based on statutory quota calculation:
Entitlement Ratio (%) = Total Shares Reserved in Category ÷ Total Eligible Shares Held by Shareholders in that Category
The Final Acceptance Ratio is usually higher than the base entitlement ratio because several eligible retail holders choose not to tender their shares:
Acceptance Ratio (%) = Total Shares Accepted by Company ÷ Total Shares Tendered by Category Applicants × 100
4. How to Tender Shares in a Buyback (Step-by-Step)
- Check the record date and eligibility on our Share Buybacks Tracker.
- Ensure you hold the shares in your demat account on the Record Date.
- When the buyback window opens (usually lasting 5 working days), log in to your broker console (e.g. Zerodha Console > Portfolio > Corporate Actions > Buyback, or Groww/Upstox Corporate Actions).
- Enter the quantity of shares you wish to tender (you can tender up to your total holding, even above your guaranteed entitlement).
- Authorize the CDSL / NSDL TPIN transaction before 3:30 PM on the closing day.
- Unaccepted shares are credited back to your demat account within 5 working days after the settlement date.
5. Buyback Taxation in India (Updated Post-Budget Rules)
Historically, companies paid a Buyback Distribution Tax (DDT) under Section 115QA and proceeds were exempt in the hands of shareholders. Under updated income tax provisions:
- Dividend Treatment: The total consideration received from a share buyback is treated as deemed dividend and taxed in the hands of the shareholder at their applicable income tax slab rate.
- Capital Loss Offset: The original cost of acquisition of the tendered shares is treated as a capital loss, which investors can carry forward and offset against other short-term or long-term capital gains.
Browse all active repurchases and premium calculations on our Share Buybacks Portal and track upcoming offer schedules on the Buyback Calendar.
Frequently Asked Questions
Can I buy shares after the record date and tender them in the buyback?
No. Only investors who hold the company shares in their demat account as of the official Record Date are legally eligible to tender shares in a tender offer buyback.
What happens to the shares that are not accepted in the buyback?
Any tendered shares that exceed the final acceptance ratio are safely returned and credited back to your demat account by the registrar immediately after settlement, with zero brokerage or penalty.
How is the ₹2 Lakh retail limit calculated for buyback eligibility?
The limit is calculated by multiplying your total quantity of shares held on the record date by the closing market price on that record date on the exchange with highest turnover. If the product is ₹2,00,000 or less, you qualify for the 15% retail reservation.
Last updated 2026-10-25. Information only, not investment advice.