Companies Choose Buyback Over Dividend Payout To Reward Investors
Are buybacks the new way to reward shareholders?
Indian companies have bought back shares worth Rs 28,290 crore till January-end - an all-time high within one financial year. This amount is more than twice the previous record of Rs 13,765 crore in financial year 2011-12.
So far financial year 2016-17 has seen 36 buybacks, second only to financial year 2008-09 which witnessed 46 buyback offers.
Four out of the five largest buyback offers this year have been made by public sector companies. NMDC Ltd. has so far bought back over Rs 7,500-crore in shares, followed by Coal India Ltd. that has spent Rs 3,650 crore buying back shares.
The country’s largest outsourcer - Tata Consultancy Services Ltd.’s Rs 16,000-crore buyback, if it gets shareholders’ approval, will be the largest in India. According to independent advisory firm IIAS, companies prefer returning money to shareholders via a buyback over dividend, as buybacks are more tax friendly.
