Abstract

This paper examines the impact of buyback regulations on shareholder value in the Indian context, highlighting how share repurchases serve as a strategic tool for companies to distribute surplus cash, enhance earnings per share (EPS), and signal undervaluation. Buybacks reduce outstanding shares, thereby increasing individual stakes, boosting returns on dividends, and acting as a defense against hostile takeovers. The analysis establishes a direct link between buybacks and shareholder value, influenced by factors like capital structure changes, investor confidence, and efficient capital allocation. Focusing on key Indian regulations under the Companies Act, 2013, and SEBI (Buy-Back of Securities) Regulations, 2018, the paper outlines restrictions such as the 25% limit on paid-up capital and free reserves, debt-equity ratios, and funding sources. Through case studies, it contrasts the Finance Bill 2016, which spurred buybacks by making them tax-efficient (leading to a surge in offers totaling Rs 26,353 crore), with the Union Budget 2024, which reclassifies buyback proceeds as dividend income taxable on shareholders, potentially deterring participation while encouraging reinvestment in growth opportunities. The author advocates for a balanced regulatory framework to optimize buybacks for long-term shareholder value alignment with broader economic goals.

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