Why Share Buybacks Are Making A Comeback In India 22Jun2026
(This is my 521st blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.
Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
India’s share buybacks have moved in cycles over time. Some years show strong activity. Other years are weak. The pattern is not random. It is shaped by profits, market conditions and most importantly, taxation and regulation.
Recent changes in buyback taxation rules by Govt of India and SEBI policy have again brought buybacks into focus.
1 Early years: limited activity >
In the early 2000s, buybacks in India were limited and irregular. The overall amounts were small, and only a small number of companies used this route to return cash to shareholders.
For example, in 2000-01, buybacks were about Rs 1,297 crore. In 2003-04, they fell to just Rs 52 crore (see Chart 1 below for data).
This period also saw strong focus on growth and investment in India Inc. Many firms were expanding capacity after major economic reforms, including the Electricity Act, public sector disinvestment and other liberalisation measures under the Vajpayee government.
As a result, capital expenditure remained a priority over shareholder payouts.
However, this did not translate into a broad-based trend.
Overall, buybacks in this phase were not a mainstream capital allocation tool. Dividends and reinvestment remained the dominant choices for companies.
Moreover, buybacks in the 2000s were small as the Indian market itself was still developing.
(article continues below)
-------------------
Related blogs:
Promoters, Taxes and Buybacks: Early Trends in India’s FY 2026-27 Market 19Jun2026
Beyond Entitlement: How Tender Offer Buyback Acceptance Really Works 18Jun2026
India’s New Buyback Tax Rules from Apr2026: What It Means for You 22Mar2026
A Layperson's Look at India's Complicated Tax Rules on Share Buybacks 16Sep2025
Negative Impact of Debt Mutual Fund Tax Changes (including taxation of equity mutual funds also) 25Mar2023
Buyback Offers and Weblinks
Check blog Kaveri Seed Company Buyback Offer 2023 for typical list of activities / timeline of events relating to buyback offers
When is the Next Buyback Offer Likely?
-------------------
2 Gradual rise: 2006 to 2012 >
From 2006 onwards, buybacks started to increase slowly. But the trend was uneven.
The global environment also influenced behaviour later in the decade.
Even during events like the 2008 global financial crisis, when markets fell sharply and valuations became attractive, only select companies used buybacks opportunistically.
The next year, they fell again.
Some years saw spikes, while others saw sharp declines.
For example, in 2011-12, buybacks rose to about Rs 13,765 crore. Indian stocks fell sharply due to overall pessimism about Indian economy, so apparently companies found the valuations attractive and announced buybacks during the year.
Some companies that undertook buybacks in 2011-12 include:
Reliance Industries (its open market buyback spanned 2011-12 and 2012-13)
Reliance Infrastructure
Zee Entertainment
PVR Ltd
Amtek Auto
Crisil Ltd
This shows that companies were still experimenting with buybacks as a capital return tool.
3 Strong growth phase: 2016 onwards >
From around 2016, buybacks became much more common.
Activity rose sharply in 2017-18 and 2018-19, when buybacks crossed Rs 50,000 crore in each year.
Buybacks spiked in 2017‑18 and 2018‑19 mainly because they were far more tax‑efficient than dividends back then. Cash‑rich IT giants like TCS, Infosys, Wipro and HCL led the charge, returning huge sums.
Private capex too was subdued during the period, with companies preferring the shareholder payout route than reinvestment.
4 Recent years: high but uneven >
Chart 1 showing details of share buybacks in India, both amount and number, from 19998-99 to 2026-27 (So far in 2026-27 till 22Jun2026, 19 listed companies actually announced buyback offers, differing from Prime Database data, as Prime Database may have considered offers with letter of offers only) >
After 2020, buybacks remained high but volatile.
In 2023-24, buybacks reached about Rs 51,143 crore, one of the highest levels on record.
After the FY 2023–24 peak, both buyback value and the number of offers fell. There are some possible reasons.
First, taxation shifted to shareholders from 01Oct2024. Buyback proceeds during the period, from 01Oct2024 to 31Mar2026, taxed as "deemed dividends" at slab rates for shareholders, with no cost set-off. This removed the earlier tax advantage.
Second, many companies rushed to complete buybacks before the change, pushing activity into 2023–24 and early 2024–25. This made the later fall sharper.
Third, SEBI phased out the open market route effective from 01Apr2024. As a result, there were zero open market buyback offers in FY 2024-25 and 2025-26.
Fourth, dividends became relatively more attractive once the tax advantage of buybacks disappeared. Many companies shifted to dividend payouts instead.
5 Taxation: the most important driver >
India's capricious tax changes have been one of the biggest factors shaping buyback trends in India.
India has changed buyback taxation multiple times in a short period of eight to nine years.
Earlier, companies paid a buyback tax of 23.30 per cent. Investors received money tax-free.
From 01Oct2024, this changed again. Companies stopped paying tax. Instead, investors were taxed on the full amount received, treated as "deemed dividend." This depended on individual tax slabs and made outcomes less predictable.
This created confusion and reduced clarity for both companies and investors.
From 01Apr2026, a new buyback tax system started. Buybacks will be taxed as capital gains. Tax will apply only on actual profit, not the full proceeds.
This brings buybacks closer to the tax treatment of normal share sales in the market.
Promoters will face higher effective tax rates, around 22 per cent for corporate promoters and 30 per cent for individual promoters.
6 SEBI and the open market route >
India's capital market regulator, SEBI, too has played a role in shaping buyback activity.
SEBI had earlier banned (rather withdrawn) the open market buyback route during 2024–25 and 2025–26.
During this period, companies were restricted to the tender offer route only for buybacks.
SEBI has now reintroduced the open market route with "safeguards" and disclosure rules after reviewing the framework and tax environment. The open market route through stock exchanges will be open from 01Aug2026.
7 Tender offer vs open market buybacks: Evolving framework >
India has historically had two routes for share buybacks.
Tender offer buybacks are structured. Companies offer a fixed price, usually at a premium to the market. Shareholders can choose to participate. This makes outcomes more predictable and easier to understand.
Open market buybacks take place through stock exchanges over time. Companies buy shares at prevailing market prices within regulatory limits. This route offers flexibility, but actual execution depends heavily on market conditions.
The Great Eastern Shipping Company provides a clear example of how open market buybacks can fall short of their announced size.
The company planned a Rs 225 crore buyback in 2022, but could deploy only about Rs 133 crore, or roughly 59 per cent. This happened because the market price stayed above the buyback price, limiting execution.
However, this open market framework has not been stable in recent years.
SEBI had restricted the open market route during FY 2024–25 and FY 2025–26, with companies doing no buybacks at all in these two years using this route. This meant buyback activity during this period was entirely through the tender offer route (see chart 2 below for data).
As mentioned in Section 6 above, the open market route has now been reintroduced, effective 01Aug2026.
As a result, recent data show a temporary distortion in the mix, with tender offers accounting for almost all buybacks in the restricted period.
Even so, across the full historical cycle, tender offers remain the dominant method. Companies tend to prefer them due to clearer pricing, simpler execution and more predictable outcomes for minority shareholders.
Chart 2 showing data on recent share buybacks in India by type (tender offer vs open market; *data for 2026-27 are till 22Jun2026) >
8 What is driving the comeback >
The revival in buybacks is visible in recent data. In FY 2026–27 (till 22Jun2026), there have been 19 tender offer buybacks in less than three months. This compares with 40 in 2022–23 and 26 in 2021–22, suggesting a faster pace in the current financial year.
One driver is stronger cash flows in several sectors and attractive valuations, after Indian stock market hit a low by the end of Mar2026.
Second is regulatory stabilisation after multiple policy changes in recent years. The current framework offers more clarity than the transition phase of 2024–26.
Third, and most important, is taxation. The shift back to capital gains treatment from 01Apr2026 makes buybacks more predictable and closer to normal equity sales.
Together, these factors point to a less erratic buyback environment, with early data already showing improved momentum.
9 Conclusion >
Buybacks in India are no longer rare. They have become a regular tool for capital return, but remain cyclical in nature. They move with profits, valuations and changes in tax and regulatory policy.
Among these, taxation has been the most powerful driver, as frequent and illogical changes created uncertainty and affected corporate behaviour. The new regime from 01Apr2026 brings greater clarity and a less volatile structure.
What stands out in the current financial year is the heightened pace of tender offer buybacks. Early data for 2026–27 already shows activity above full-year levels seen in recent years, indicating renewed momentum.
In simple terms, the buyback cycle in India is being shaped not just by markets, but by tax policy and regulation. And the latest data suggest that activity is picking up again, led by tender offer buybacks.
However, investors need to be wary of capricious and arbitrary nature of India's tax regime and capital market over-regulation.
Check below for references and additional notes.
- - -
---------------
Additional data:
How to score self-goals, the Thiru PM Modi gov't way?
(tweet thread 22Jun2026 on this)
Indian government effectively killed a golden goose with frequent changes to taxation of dividends and buybacks (this is my personal opinion).
The amount of share buybacks, by India's listed companies, during the past five years (FY 2021-26) has fallen sharply by nearly 35 per cent to Rs 1.32 lakh crore compared to the five-year period of FY 2016-21.
35% sharp fall in share buybacks means lower tax revenue for Consolidated Fund of India.
Self-goals include:
Capricious changes to taxation of dividends / buybacks (7 to 8 changes since 2016). 👎
Banning of open market route for share buyback route by SEBI in 24-25 & 25-26.👎
Data showing Buyback activity in India by Five-year Buckets (Five-year rolling periods of sahre buyback activity in India) >
---------------
References:
Tweet thread 20Jun2026 SEBI circular 19Jun2026 reintroducing "open market" share buybacks in India
Tweet thread 01Feb2026 No need to do "Bhalle Bhalle" -- tax changes on buyback announced in Union Budget presented on 01Feb2026
Tweet thread 01Feb2026 PM Modi gov't changed the buyback taxation as their (unpublished) data shows that from 01Oct2024–31Jan2026, the Jul2024 buyback tax change raised minimal revenue.
23Dec2024 Tweet thread - Dividends / buyback announcements by companies are influenced by capricious changes in taxes. Dividend distribution tax (DDT) was introduced and later it was abolished. Now, dividends are taxable in investors' hands (taxtortion by PM Modi gov't).
22Sep2020 Tweet shareholder yield (buyback plus dividends)
Prime Database > Number and amount of Share buybacks from FY 1998-99 to FY 2026-27 >
BSE weblink
to search for past buyback offers (only tender offers - dropdown menu)
during a time period (this weblink can also be used for other corporate
actions) -- this URL / weblink will not provide details of past buyback
offers that are done via 'open market route via stock exchanges'
SEBI weblink to search for past buyback offers (both tender and open market offers -- dropdown menu) during a time period
Screener.in (after login) weblink to search for past buyback offers (e.g., enter 'Moil buyback' in search bar and several results will pop up)
