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.
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.
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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?
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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 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 begins. 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.
The open market buyback route allows companies to repurchase shares directly from the stock exchange over time. It is different from the tender offer route, where shareholders sell at a fixed price.
SEBI had earlier banned (rather withdrawn) the open market buyback route during 2024–25 and 2025–26. This was mainly due to concerns around fairness in execution and uneven outcomes for different shareholders.
During this period, companies were largely restricted to the tender offer route 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.
Even after its return, tender offer buybacks remain more common in practice. They are simpler and more transparent for both companies and shareholders.
7 Tender offer vs open market buybacks >
India uses two main methods for buybacks.
Tender offer buybacks are structured. Companies offer a fixed price, usually at a premium. Shareholders choose whether to participate.
Open market buybacks happen through the stock exchange at market prices over time.
In recent data, tender offer buybacks are more common than open market buybacks. Companies prefer them because they are easier to execute and provide clearer outcomes.
Chart showing data on recent share buybacks in India by type (tender offer vs open market) >
8 What is driving the comeback >
The recent revival in buybacks is driven by a combination of factors.
First is improved corporate cash flow in several sectors. Companies have more surplus capital.
Second is regulatory clarity compared to the uncertainty of the past few years.
Third, and most important, is taxation. The move back to capital gains treatment from 01Apr2026 makes buybacks more predictable for investors.
Together, these factors support a more stable environment for buybacks.
9 Conclusion >
Buybacks in India are no longer rare events. They are a regular part of corporate behaviour.
But they remain cyclical. They rise and fall depending on profits, market valuations and tax policy changes.
Among all factors, taxation has had the strongest influence. Frequent changes created uncertainty. The new regime from 01Apr2026 brings more clarity and a more standard structure.
In simple terms, the comeback of buybacks in India is not just about markets. It is about how the tax system and regulation shape corporate decisions.
However, investors need to be wary of capricious nature of tax rules and capital market regulations.
Check below for references and additional notes.
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Additional notes:
1. Note
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