Buybacks down to a trickle after tax tweak shifts burden to shareholders

Share buybacks have all but disappeared following a rule change on October 1 last year that shifted the tax burden from companies to shareholders. Under the revised norms, buyback proceeds are taxed as dividends at the shareholders' applicable income-tax rates, significantly increasing the liability for high-networth individuals and institutional investors in the highest tax bracket.
Since the change, only two buybacks have been completed: A ₹360 crore repurchase by ferro alloys manufacturer Nava and a ₹72 crore offer by online matrimonial services provider Matrimony.com.
'Buybacks have dried up since the tax-rule change, which aligned their taxation with dividends. Despite a bear market since October — a period when buybacks typically thrive — activity has been negligible,' said Pranav Haldea, managing director, Prime Database.
Dividends and buybacks constitute the primary mechanisms for returning excess cash to shareholders. The new structure seeks to eliminate the tax arbitrage between the two routes. Currently, companies incur no tax outgo on dividend payments, which are taxed solely in the hands of the recipient in accordance with their income bracket.
With the parity in tax treatment, market participants are preferring dividends as the more efficient vehicle for capital distribution.
Unlike buybacks, dividends do not require the appointment of merchant bankers, face fewer compliance requirements from the Securities and Exchange Board of India (Sebi), and can be executed at a greater speed. Buybacks, in contrast, are administratively heavier and typically take several weeks to complete.
Between FY17 and FY19, the share of buybacks in total shareholder rewards increased significantly due to a tax differential. From April 1, 2016, the government introduced an additional 10 per cent levy on dividends, pushing the effective dividend distribution tax (DDT) to 20.6 per cent, while listed company buybacks remained tax-exempt.
The proportion of buybacks in total shareholder rewards in FY16 stood at just 1 per cent, rising to an average of 25 per cent over the FY17-FY19 period. To address this tax imbalance, the government imposed a 20 per cent buyback levy from April 1, 2019. Nevertheless, buybacks remained attractive for cash-rich firms as the tax liability rested with the company, not those tendering their shares.
The most recent shift in tax incidence has, once again, altered the landscape.
A buyback entails a company repurchasing and extinguishing its own shares, thereby reducing its equity base and enhancing metrics such as earnings per share (EPS) and return on equity. 'Companies now prefer dividends to buybacks. The EPS boost from buybacks is marginal, as the buyback amount is small relative to market capitalisation,' said Deepak Jasani, former head of retail research at HDFC Securities. The remaining strategic rationale for buybacks, he said, lay primarily in enabling promoters to consolidate their holdings by not tendering their shares.
'Only firms where promoters seek to raise their stake are likely to pursue buybacks. Otherwise, dividends involve simpler procedures and fewer compliances,' Jasani added.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Business Standard

3 days ago

• Business Standard

Health-tech sees IPO rush fueled by digitisation, govt ease, AI adoption

Health-tech IPOs (initial public offerings) are on the rise in India's healthcare sector — in fact, five out of the 12 healthcare IPOs in the last one-and-a-half years since January 2024 are health-tech companies. According to data shared by PRIME Database, the healthcare sector has seen 12 IPOs since January 2024, with a total issue size of Rs 20,576 crore. Of these, five companies — Entero Healthcare Solutions, Indegene, Sagility India, Sai Life Sciences and Inventurus Knowledge Solutions — are health-tech firms that have collectively raised over Rs 11,000 crore. Other major healthcare IPOs include Emcure Pharmaceuticals, Akums Drugs and Dr Agarwal's Healthcare. The Covid-19 pandemic had a deep impact on the sector and accelerated digitisation, strengthened public and private focus on tech-enabled healthcare solutions, facilitated government easing, and encouraged the adoption of artificial intelligence (AI) across the spectrum — from diagnostics to personalised treatment. Amitabh Malhotra, vice-chairman of investment banking at HSBC India, noted that the combination of rising incomes, greater insurance penetration, growing demand for medical infrastructure and India's cost competitiveness positions the healthcare industry for sustained, multi-decade growth — driven largely by the private sector. 'The Indian healthcare services market presents a compelling growth story, underpinned by its significant potential and current under-penetration. With healthcare expenditure around 3 per cent of GDP and per capita spend of $57 — among the lowest globally — the sector is ripe for transformation,' Malhotra noted. Health-tech IPOs in India have witnessed significant growth in recent years, fuelled by increasing digitisation of healthcare and a rising focus on technology-driven solutions — spurred by both public initiatives such as e-Sanjeevani and private sector tech-focused offerings, said Vivek Tandon, vice-president at Primus Partners. 'The pandemic played a major role in highlighting the importance of digital health infrastructure, boosting investor interest in companies offering telemedicine, diagnostics and health data solutions. The growing use of AI in healthcare, from diagnostics to personalised treatment, has further enhanced the appeal of these companies. Additionally, government focus and ease of reforms has made it easier for health-tech firms to scale and access public markets,' added Tandon. More firms are gearing up for IPOs over the coming years, including QubeHealth, Vitraya, Practo, Medulance, among others. Mumbai-based B2B health-tech-fintech firm QubeHealth has announced plans to file for an IPO by FY31, with a proposed issue size of approximately Rs 800 crore. 'We expect to process Rs 1,000 crore a year in healthcare payments by FY30, by the time we are ready for our IPO, growing at an average of 70 per cent year-on-year,' said Chris George, CEO, QubeHealth. Vitraya, a Delhi-based health-tech company, said it plans to file its Draft Red Herring Prospectus (DRHP) within the next 24 to 36 months. The company is targeting an IPO issue size of Rs 500 crore. 'The tech sector is heavily regulated, so going public through an IPO offers added credibility and reassurance to both our customers and regulators. For us, the IPO is more about embracing transparency and navigating regulatory frameworks than raising capital or seeking liquidity. Currently, around 80 per cent of our revenue comes from India and 20 per cent from international markets. Post-IPO, we expect the domestic share to further outpace international contributions,' said Mrinal Sinha, CEO and co-founder, Vitraya Technologies. Most of the listed players in the healthcare sector are trading at substantial valuation premiums, making IPOs an important factor, said Chokkalingam G, founder of Equinomics. 'The sector's outlook remains strong, supported by inelastic demand — healthcare is a necessity, and consumers are unlikely to cut back on related expenses even in challenging times.' 'Previously, IPO activity was largely concentrated in pharmaceutical companies and standalone hospitals. However, the landscape is now expanding to include a wide range of ancillary businesses that support healthcare providers. Many of these companies are seeking growth capital and providing liquidity for existing investors. As a result, we are likely to see a significant number of IPOs from this space over the next three years.' healthcare IPOs 1.1.2024 onwards Industry: Hospitals/Diagnostic Services, Medical Equipment/Supplies/Accessories & Pharmaceuticals & Drugs SNO. COMPANY OPENING DATE OFFER PRICE (Rs.) ISSUE AMOUNT ( 1 ENTERO HEALTHCARE SOLUTIONS LTD. 09/Feb/2024 1,258 1,600.00 2 GPT HEALTHCARE LTD. 22/Feb/2024 186 525.14 3 INDEGENE LTD. 06/May/2024 452 1,841.76 4 EMCURE PHARMACEUTICALS LTD. 03/Jul/2024 1,008 1,952.03 5 AKUMS DRUGS & PHARMACEUTICALS LTD. 30/Jul/2024 679 1,856.74 6 SAGILITY INDIA LTD. 05/Nov/2024 30 2,106.40 7 SURAKSHA DIAGNOSTIC LTD. 29/Nov/2024 441 846.25 8 SAI LIFE SCIENCES LTD. 11/Dec/2024 549 3,042.62 9 INVENTURUS KNOWLEDGE SOLUTIONS LTD. 12/Dec/2024 1,329 2,497.92 10 SENORES PHARMACEUTICALS LTD. 20/Dec/2024 391 582.11 11 LAXMI DENTAL LTD. 13/Jan/2025 428 698.06 12 HEALTH CARE LTD. 29/Jan/2025 402 3,027.26

Mint

13-06-2025

• Mint

Breakout stocks to buy or sell: Sumeet Bagadia recommends five shares to buy today — 13 June 2025

Breakout stocks buy or sell: the Indian stock market experienced a broad-based decline on Thursday, following the weakness in global markets due to escalating geopolitical tensions, persistent concerns over tariffs, and a weakening outlook for global economic growth. The Sensex fell by 823 points, or 1 per cent, closing at 81,691.98, while the Nifty 50 slipped 253 points, or 1.01 per cent, to end at 24,888.20. The BSE Midcap and Smallcap indices also declined, registering losses of 1.52 per cent and 1.38 per cent, respectively. Sumeet Bagadia, Executive Director at Choice Broking, believes that Indian stock market sentiment has turned weak as the Nifty 50 index has broken below 25,000. Speaking on the outlook of Indian stock market, Bagadia said, ' The key benchmark index has now made new base at 24,500 levels, while the 50-stock index is facing resistance at 25,200. Bullish or bearish trend can be assumed on the breakage of either side of this range. So, one should maintain stock-specific approach and look at those stocks that are looking strong on the technical chart. Looking at breakout stocks can be a good option." Sumeet Bagadia recommends five shares to buy today — Sree Rayalaseema Hi-Strength Hypo, Nava, Rainbow Children's Medicare, Suven Life Sciences, and Privi Speciality Chemicals. 1] Sree Rayalaseema Hi-Strength Hypo: Buy at ₹ 671.1, target ₹ 720, stop loss ₹ 650; 2] Nava: Buy at ₹ 560.25, target ₹ 600, stop loss ₹ 540; 3] Rainbow Children's Medicare: Buy at ₹ 1458.2, target ₹ 1555, stop loss ₹ 1410; 4] Suven Life Sciences: Buy at ₹ 260.55, target ₹ 277, stop loss ₹ 250; 5] Privi Speciality Chemicals: Buy at ₹ 2360.9, target ₹ 2555, stop loss ₹ 2277. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.

Time of India

06-06-2025

• Time of India

CG PET 2025 result declared; Ayush Patle tops with 127 marks

CG PET 2025 final answer key released; over 12,000 candidates make merit list CG PET 2025 result: The Chhattisgarh Professional Examination Board (CG PEB) has officially announced the results of the Chhattisgarh Pre-Engineering Test (CG PET) 2025. The result was declared on June 6, 2025, and is now available on the official website — Candidates who appeared for the entrance test can now check their scores by logging into their Vyapam profile using their roll number. This year, a total of 12,276 candidates have been included in the CG PET 2025 merit list. The examination was conducted on May 8, 2025, from 9:00 am to 12:15 pm, for admissions to several undergraduate engineering programmes including Bachelor of Engineering (BE), Bachelor of Technology (BTech), BTech in Agriculture Engineering, BTech in Food Technology, BTech in Dairy Technology, and Diploma in Dairy Technology (DDT). Top rankers lead with close scores Ayush Patle, belonging to the OBC (Non-Creamy Layer) category, has secured the top position in CG PET 2025 with a score of 127 marks. Following closely are Aarjoo Wankhede (OBC) and Akshay Issar (General), who both scored 125 marks. Other high scorers include Drishti Chhabda, Parth Shende, and Charu Dewangan, each earning 124 marks. All top six candidates are domicile holders. The merit list also features Ayati Bijoria (120 marks), Ruchi Asrani (118 marks), Kritika Sharma (118 marks), and Srijan Singh Bhadouriy (118 marks), showing strong competition among top performers from both OBC and General categories. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Memperdagangkan CFD Emas dengan salah satu spread terendah? IC Markets Mendaftar Undo Final answer key released with result Alongside the results, CG PEB has released the final answer key. As per the key, four questions have been dropped from the original paper. The final merit list includes candidate-specific information such as roll number, application number, name, category, class type, gender, date of birth, disability status, type of disability (if any), domicile status, and total marks obtained. Steps to check CG PET 2025 result online To access the CG PET 2025 result, candidates can follow these steps: Step 1: Visit the official website at Step 2: Click on the link labelled 'CG PET result' available on the homepage. Step 3: Enter your roll number in the login section. Step 4: Click the 'Submit' button to proceed. Step 5: View and download your result for future reference. Direct link to visit the official CG PET Website Pathway to engineering and technology courses The CG PET 2025 examination serves as a gateway for students seeking admission to various engineering and technology-related undergraduate programmes in Chhattisgarh. With the results now published and the answer key finalised, students can move forward with the counselling and admission procedures based on their merit position. Ready to navigate global policies? Secure your overseas future. Get expert guidance now!