What is Buyback of Shares and How does it works?

Buy-back of shares is an investment instrument by which a company buys its own shares from the existing shareholders. This can be carried out in two different ways: Proportionate Basis and Book-Building process. In the first method; the company buys back its shares from the existing shareholders on a proportionate basis via offer. While in the second method they buys back through the stock-exchange. There are a number of guidelines associated with this process. It leads to a fall in the number of outstanding shares, a rise in EPS and an increase in the market price of the shares. It is used to eliminate threats, delisting and converting extra cash.

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