The Indian stock market has experienced a notable increase in share buybacks, marking a significant trend in 2024. This increase is largely attributed to changes in taxation laws and a strategic focus on enhancing shareholder value. As we explore the biggest buybacks in India, several companies have initiated substantial buyback schemes, highlighting key deals that have made headlines this year.
Understanding Share Buybacks
What is a Share Buyback?
A share buyback occurs when a company repurchases its shares from the market, reducing the number of outstanding shares. Naturally, this reduction leads to an increase in earnings per share (EPS) and eventually makes the stock price attractive relative to earnings. Buybacks also signal to investors that the company believes its stock is undervalued. The recent changes in India’s taxation regime have further incentivized companies to consider buybacks as a viable option for returning capital to shareholders.
The Tax Landscape Shift
The Union Budget of 2024 introduced significant changes to the taxation of buybacks, effective from 1 October 2024. Previously, companies faced a buyback tax of over 20%, but under the new rules, the tax burden shifts to shareholders as the income from buybacks will be taxed as dividends according to individual tax slabs. This change is expected to influence corporate strategies regarding capital distribution.
Spotlight on the Five Largest Buyback Deals
Over the past decade, Tata Consultancy Services (TCS) and Wipro have been at the forefront of share buybacks in India, spending significant amounts to repurchase their shares. According to IPOCentral, in 2023 alone, 49 companies (Tender and Open Market) collectively spent approximately INR 58,620 crore on share buybacks, with a notable concentration in sectors such as IT, FMCG, and pharmaceuticals—industries characterized by strong cash flows and low capital expenditure requirements.
As of 2024, share buybacks in India have surged, with 49 companies collectively spending approximately INR 13,550 crore. This trend reflects a significant increase in corporate strategies to return cash to shareholders amid changing tax regulations. In September 2024, 12 companies executed buybacks totaling INR 834.96 crore. This was part of a broader trend where companies were taking advantage of favorable conditions before new tax laws came into effect. Notably, in August 2024, 13 companies had already repurchased shares worth INR 5,032 crore, marking the highest buyback amount in over a year.
#1 Bajaj Auto – Among the Biggest Buybacks In India for 2024
Buyback Dates – 6 – 13 March 2024
Offer Size – INR 4,000 crore
Buyback Price – INR 10,000 per share
Bajaj Auto’s initiative stands out among the biggest buybacks in India for 2024, showcasing its commitment to enhancing shareholder value while optimizing its capital structure.
Business Overview: Bajaj Auto stands as a bastion in the realm of two-wheeler and three-wheeler craftsmanship. Its footprint extends across a mosaic of 79 nations, spanning the rich tapestry of Latin America, Southeast Asia, and beyond. The epicenter of this industrial saga resides in Pune, India. A narrative of evolution unfolds as Bajaj Auto, with a strategic grasp, has propelled its stake in the KTM Brand to an impressive 48%. A saga that commenced at a modest 14% in 2007, during the initial embrace of KTM by the company.
#2 Indus Towers
Buyback Dates – 14 – 21 August 2024
Offer Size – INR 2,640 crore
Buyback Price – INR 465 per share
Business Overview: Indus Towers is an Indian telecommunications infrastructure company that provides passive infrastructure services to mobile network operators and other wireless service providers. Headquartered in Gurugram, Haryana, Indus Towers was incorporated in November 2007 by Bharti Infratel (a subsidiary of Bharti Airtel), Vodafone Essar, and Idea Cellular to offer shared telecom infrastructure to telecom operators on a non-discriminatory basis.
#3 Aurobindo Pharma
Buyback Dates – 5 – 9 August 2024
Offer Size – INR 750 crore
Buyback Price – INR 1,460 per share
Aurobindo Pharma’s involvement in this year’s buyback frenzy further emphasizes the significance of these transactions among the biggest buybacks in India.
Business Overview: Established in 1986, Aurobindo Pharma is a leading Indian pharmaceutical company. Aurobindo manufactures and markets generic pharmaceuticals and active pharmaceutical ingredients (APIs). Its products spans major therapeutic areas such as antibiotics, antiretrovirals, central nervous system, cardiovascular, anti-diabetics, and more. The company has a large diversified product portfolio with over 870 marketed drugs and a strong global presence, exporting to over 150 countries.
#4 Chambal Fertilisers
Buyback Dates – 24 – 31 January 2024
Offer Size – INR 700 crore
Buyback Price – INR 450 per share
Business Overview: Chambal Fertilisers & Chemicals Ltd is actively involved in the production of Urea within its dedicated manufacturing plants. Additionally, the company engages in the marketing and trade of various fertilizers and agri-inputs. The extensive product portfolio encompasses Urea, Di-ammonium Phosphate (DAP), Muriate of Potash (MOP), Ammonium Phosphate Sulphate (APS), diverse NPK fertilizers, Sulphur, Micronutrients, and Agrochemicals. While Urea is exclusively manufactured in-house, the distribution network facilitates the trading of other fertilizers and agri-inputs. Notably, a Joint Venture oversees the production of Phosphoric Acid in Morocco.
#5 Zydus Lifesciences
Buyback Dates – 29 Feb – 6 Mar 2024
Offer Size – INR 600 crore
Buyback Price – INR 1,005 per share
Zydus Lifesciences added to the list of significant transactions classified under the biggest buybacks in India, reflecting a broader corporate strategy.
Business Overview: The company was initially incorporated as Cadila Healthcare on 15 May 1995 under the provisions of the Companies Act, 1956. It later converted to a public limited company and changed its name to Cadila Healthcare Limited on 17 July 1996. Subsequently, on 24 February 2022, the company changed its name to its present name, ‘Zydus Lifesciences Limited’.
The company operates 35 manufacturing facilities, plants, and factories in India. Additionally, it maintains 7 research and development centers in the country, focusing on generic formulations, active pharmaceutical ingredients (API), vaccines, biologics, and new chemical entities across various dosage forms.
Analyzing Market Trends
The surge in buybacks can be attributed to several factors:
- Tax Incentives: The shift in tax liability from companies to shareholders has created an urgency among firms to execute buybacks before the new rules come into effect.
- Strong Cash Reserves: Many companies are sitting on substantial cash reserves and are looking for ways to deploy this capital effectively.
- Market Sentiment: Positive investor sentiment towards share repurchases often leads to an increase in stock prices post-announcement.
Conclusion
This strategic shift towards share buybacks reflects a proactive approach by Indian companies to enhance shareholder value amid evolving regulatory landscapes. As we continue through 2024, it will be essential to monitor how these trends evolve and what new deals emerge among the biggest buybacks in India.
