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A company that is performing well and has excess cash available can opt for share buyback to reward its existing shareholders.
Stock buyback has many benefits for the issuer company as it helps to boost the value of underpriced shares. Buyback reduces the number of outstanding shares in the market which increases return on assets (ROA), return on equity (RoE), and Earnings per share (EPS).
Further, it prevents takeover bids, enhances consolidation of stakes, and balance creates optimal capital structure through right mix of debt and equity capital.
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