How do I participate in an Open Market Buyback? How is it different from a normal buyback?
Companies can choose two different methods to buy back shares from their public shareholders:
1. Buyback Tender Offer : The company makes an offer to buy back its shareholders(Offer price) at which the shareholders can tender their shares. If you are eligible for the buyback, you can apply for the same from Console . You can read more on the process to apply here .
2. Open-market buyback : The company can opt to buy back its shares by actively buying from sellers on the exchange platform. The company mentions the period of buyback in the buyback offer. These buybacks usually last for months as the company has to ensure that there isn't significant price appreciation due to its buying activity.
You might not receive the settlement for all the shares that you sold for a buyback offer because only a portion of it would have matched with the company's buyback order. You will receive an email from the exchange where your trades are executed with the details of your executed buyback order, including the quantity of the shares.
The government has introduced a buyback tax, and the company buying back the shares (open-market or tender buyback offer) pays all taxes on the buyback offer. You can use this confirmation for appropriate tax exemptions under the provisions of the Income Tax Act, 1961.
Assume, you have sold 2000 shares of a company from your holdings. It is possible that the company buys back only 800 shares and the remaining 1200 shares might have been sold to another regular buyer. You will receive an email from the exchange confirming the transaction of the 800 shares that were bought back by the company.
You can find these details here on the SEBI website along with the list of all upcoming open market buybacks.
Check out this chapter on Varsity to know why companies choose to buy back their shares and its impact.