06 March 2017
For Company it is Capitalization of Reserve. Free float of share in market reduce. When the company believes that market price of its share is under valued as compared to book value and they have sufficient cash reserve, normally they resort to buy back of share. By doing so, promoters share holding will increase and non promoter stake in company will reduce, which will prevent the Company from hostile bid.
From investor point of view, when a company announces buy back which is normally higher than the current market price, the market price of share goes up, so the investor get the opportunity to sell at higher rate. Buy back are normally carried out in open market. It improve share holder value & boost in share prices.
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