If you are a regular follower of the market, you may get different news on the buybacks of various companies. Suppose, one of the company’s stocks you hold announces a buyback, you may participate in the same if you wish to, through your broker (Zerodha). Here. I will guide you on how to Apply for Buyback in Zerodha. After providing a brief introduction to the buyback we will move to the main content on how to apply for it.
First of all, open your Demat and, go to the tab of the IPO. You will find the details of the buyback companies. Click over on which company buyback you want to work with. Then enter the desired quantity of shares to be sold. Lastly, submit it and wait for your good luck after the cut-off date.
Open your Zerodha Kite account. Then go to the back office or console section. There you can find options for Buyback shares. Once you open it, automatically, all the recent buyback deals will come there. You choose your preferable one and click on it. After that, select your quantity and enter the final order.
OFS is the offer for sale or simply selling the shares through the exchange of some listed companies. Offer for sale enables the promoters to dilute their holdings in listed companies. And Buyback means when a company buys or repurchases its own shares to improve its financial ratios. You can find both OFS and Buyback options on the Zerodha platform.
What is the Buyback in the Stock Market?
Buyback is a particular mechanism that enables a company to purchase back its own shares from the shareholders or the market. Here are the reasons for the buyback.
- To improve a company’s earnings per share or EPS.
- Achieve optimum capital structure in a company.
- To enhance consolidation of the stake in the company.
- Another important reason is to increase the value of the share by reducing its supply.
Methods of Buyback Shares
The buyback can be done in four ways, the open market purchase, fixed price tender offer, Dutch Auction tender offer, and, direct negotiation.
Open Market Buyback
In the Open market, the company buys back its own share from the secondary market.
Fixed Price Tender Offer
On the other side, under the tender offer, investors can tender shares during the buyback offer. Previously, most of the market preferred the open market route. Here are some reasons for the buyback.
Dutch Auction Tender Offer
In this Dutch auction, a company makes a tender offer to the shareholders to buy back shares. And gives a range of possible prices. Then, the shareholders can make their bids by specifying the number of shares. And also the minimum price at which they want to sell their shares.
Here, a company directly approaches one or multiple large shareholders just to buy back the company’s shares from them. In this case, the share purchasing price includes the premium.
How to Apply for Buyback in Zerodha?
Suppose, currently you hold stocks in a specific company and the company announces a buyback. If you wish you may participate in the buyback program through your broker. Here, we will place Zerodha as an example. Now, let’s find out
How do you participate in BuyBack?
- So, if you are eligible for the buyback, you will receive a Tender form to your own registered email id from the Company.
- You can also apply for the buyback on the Console (from Zerodha).
- Now, once the shares are tendered in the buyback, you require to pass on the details of the shares, so that they can be updated in your Zerodha smallcase as well.
Steps to Apply for Buyback
The steps are as follows:
Log in to the Console
Firstly, you have to have an account with ZERODHA. From the Zerodha Back Office or Console, one can apply the buyback in Zerodha.
Corporate Action Section
After reaching to the console page, see the above right-corner side portfolio section. There you can find corporate action. I’ve highlighted the area.
OFS & Buybacks
After clicking on the corporate action, you will find OFS & Buybacks. The buyback offers will be automatically updated here. Just like, now, the offer is going on ONGC, TATAINVEST, etc.
Place the Order
After that, select your preferred stock and select “options” and then click on “place order”.
Lastly, enter the number of shares you want to tender and select the ‘Submit’ option.
For buyback tenders, charges will be applied of Rs.20+18% GST.
Here, Buyback Takeover or Delisting orders are collected until 6:00 PM in the evening. It is just one day prior to the offer end date. You need to ensure to hold sufficient quantities in your Demat a/c on the offer end date. Just remember, do not sell the shares after placing the order)
Important Points Regarding Buyback in Zerodha
- When the buyback window closes, the acceptance ratio will be calculated. It depends on the number of shares tendered and the number of retail investors (applied for the buyback).
- If investors tender more shares than their entitlement, then whether these additional shares will be accepted for buyback or not will solely depend on the acceptance ratio (decided by the company).
- You can find the details of the upcoming buyback in the bulletin of Zerodha.
- If you still face any problems, you can contact their service center.
Limitations of the Process of Buyback in Zerodha
- You cannot apply all buybacks using Zerodha Console. In case, if the buyback option can’t be seen in Console, investors have to send a scanned copy of the “Tender Form”. They can fill up the tender form by creating a ticket. The company will send the updates to their registered email ID or address.
In conclusion, I hope the article How to Apply for Buyback in Zerodha will guide investors properly. Zerodha not only provides full information regarding the recent buyback offers but also gives investors the opportunity to work with it.