Resurgence of Share Buybacks in India Amid Tax Reforms and Market Decline
Buybacks regain favour after tax reset, market slump boosts appeal in India
Business Standard
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Share buybacks are regaining popularity among Indian companies following favorable tax reforms and a decline in stock prices. Notable firms like Wipro and Aurobindo Pharma have announced repurchase plans, signaling confidence in their valuations as the Nifty 50 index drops nearly 8% year-to-date.
- 01Recent tax reforms have made buybacks more appealing to non-promoter shareholders.
- 02In FY26, companies repurchased shares worth ₹19,500 crore, a significant increase from ₹8,034 crore in FY25.
- 03The Nifty 50 index has fallen nearly 8% this year, prompting companies to consider buybacks as a way to reward shareholders.
- 04Buybacks are seen as a method to indicate undervaluation of stocks and improve financial metrics.
- 05The Securities and Exchange Board of India (Sebi) may reintroduce open-market buybacks, enhancing flexibility for companies.
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Share buybacks are experiencing a revival in India, with several companies, including Wipro and Aurobindo Pharma, announcing repurchase plans this month. This trend follows the Finance Act of 2026, which changed the taxation of buybacks from a 'deemed dividend' approach to capital gains taxation, making buybacks more tax-efficient for non-promoter shareholders. In FY26, companies repurchased shares worth ₹19,500 crore (roughly $2.4 billion USD), a significant increase from ₹8,034 crore (roughly $970 million USD) in FY25. The Nifty 50 index has seen a decline of nearly 8% year-to-date, which has encouraged cash-rich companies to consider buybacks as a way to reward shareholders and signal confidence in their stock valuations. Analysts believe that buybacks will complement dividends, particularly in volatile markets, and the potential reintroduction of open-market buybacks by the Securities and Exchange Board of India (Sebi) could further enhance this trend.
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The revival of buybacks could lead to increased shareholder returns and improved stock valuations, benefiting investors in the Indian market.
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