Practical Perspective on Shares Buyback [Example: Tanla Platforms]

Introduction

In this post I’lll talk about share buybacks. At times an occasion comes for the shareholders when their company offers share buyback.

Recently a company called Tanla Platforms has brought such an offer for its shareholders. Read about Tanla’s Q1 FY26 results here.

So, I’ll take this event as an example and try to explain the mechanism of share buyback.

As an investor, I’ve always found buybacks fascinating. They’re like a company saying, “we believe in ourselves, and we’re giving back to you!”

So, let’s dive in and understand what a buyback is, why companies do it, and how Tanla’s recent buyback fits into this picture.

1. What Is a Share Buyback?

A share buyback is when a company buys its own shares from the market or directly from shareholders.

It is a way for a company to reduce the number of its shares floating around.

Fewer shares mean the value of each remaining share could go up.

It’s like slicing a loaf of bread into fewer pieces. This way, each piece gets bigger and thicker.

In India, buybacks are regulated by the SEBI. Hence, they can happen through two main routes:

• The open market or
• The tender offer.

Tanla’s recent buyback, for instance, is through the tender offer route.

We’ll discuss more on that later in this article (you can jump here for details).

2. Why Do Companies Go for Buybacks?

Why would a company spend money to buy its own shares? Good question.

There are a few reasons, and they’re not just about looking cool in the market.

• First, it’s a way to return surplus cash to shareholders. If a company has extra money lying around, it can either invest it or give it back. A buyback is one way to do that. The other way is to pay dividends.
• Second, it can boost financial ratios like earnings per share (EPS). Fewer shares mean the same profit is divided among fewer investors, so EPS goes up.
• Third, it signals confidence. When a company buys back shares, it’s like saying, “We think our stock is undervalued, and hence we are buying it back to increase our stake.”

But this is also true that buybacks aren’t always a golden ticket.

Sometimes, companies use them to artificially prop up share prices. As investors, we need to analyze the real purpose of the shares buyback. For that, we as investors, must dig deeper.

Let’s see why our example company Tanla Platforms chose this path.

3. Tanla’s 2025 Buyback – The Details

On June 16, 2025, Tanla’s board approved a buyback of up to 20 lakh equity shares. Each share has a face value of Rs.1 and will be bought back at Rs.875 per share.

That’s a total of Rs.175 crore (= 20 Lakhs x 875), which is about 1.49% of their total equity share capital of Tanla.

It means, the company will use its reserves to invest Rs.175 crores to buy back its own shares. Rs.175 crores is the maximum limit.

[Note: On the day when I’m writing this post, Tanla’s shares are trading at Rs.650 per share. This is a 25% discount to the offered buyback price of Rs.875/share]

Here are a few terms used in buyback. Let me explain it to you with the context of Tanla.

• The buyback is through the tender offer route. What does it mean? It means shareholders have a choice to offer their shares at the fixed price of Rs. 875.
• The record date was July 23, 2025, and the tendering period runs from July 29 to August 4, 2025. What does it mean? The record date determines eligible shareholders for Tanla’s buyback. If you held Tanla shares on July 23, you’re eligible to participate. The tendering period, July 29 to August 4, 2025, is when those shareholders can offer their shares for the buyback at Rs.875 per share.
• The buyback represents 24.81% of Tanla’s paid-up equity capital and free reserves (standalone) and 7.78% (consolidated) as of March 31, 2025. What does it mean?
  • Standalone Financials (24.81%): This refers to Tanla’s own financials, excluding its subsidiaries. As of March 31, 2025, Tanla’s paid-up equity capital (money raised from issuing shares) plus free reserves (profits and other funds not tied up) totaled a certain amount. The Rs.175 crore buyback is 24.81% of this total. So, if their standalone paid-up capital and free reserves were, say, Rs.705 crore, the buyback is using up nearly a quarter of that amount.
  • Consolidated Financials (7.78%): This includes Tanla plus its subsidiaries, like their operations in Singapore or Dubai. Here, the consolidated paid-up capital and free reserves are larger because they account for the entire group’s finances. The Rs.175 crore buyback is 7.78% of this bigger pool. So, the consolidated total might be around Rs.2,249.
  • That’s a significant chunk of their reserves. It shows that the company is serious about returning value to shareholders.
• The promoters, holding 45.49% of the shares, have said they won’t participate. This means more opportunities for retail investors like you and me. Promoters are not going to offer their shares for buyback

4. How Does the Tender Offer Work?

In a tender offer, eligible shareholders can “tender” their shares to the company at the set price.

For Tanla, if you held 105 shares on the record date, your entitlement is only 2 shares for the buyback.

Yes, you can’t offer all 105 shares for guaranteed acceptance.

This is because of the proportionate allocation rule in the tender offer process, governed by SEBI regulations in India (read about the tender offer process here).

What is the need of this limit? Let’s understand it using Tanla’s example.

Tanla is buying back only 20 lakh shares (1.49% of its total equity). If every shareholder offered all their shares, the demand would likely exceed this limit.

To make it fair, SEBI requires companies to set an entitlement ratio, which decides how many shares each shareholder can offer based on their holding.

For Tanla, the entitlement ratio is about 2.72%. It means, for every 100 shares you hold, you’re entitled to offer roughly 2-3 shares. For 105 shares, that rounds to 2 shares.

This rule exists to ensure equity among shareholders. Without it, big investors could dominate the buyback, leaving small retail investors like you and me with nothing.

The proportionate system gives everyone a fair shot, especially small shareholders (those with 200 or fewer shares), who get a reserved quota. You can offer more than your entitlement (e.g., all 105 shares), but only the entitled portion is prioritized for acceptance.

If fewer shareholders participate, your chances of getting more shares accepted increase.

On the face of it, the proportionate allocation rule might seem restrictive, but it’s designed to balance fairness and prevent large investors from crowding out smaller ones.

You can check your exact entitlement on KFin Technologies’ website, the registrar for this buyback.

During the tendering period, you tell your broker how many shares you want to sell. The broker places the order on the BSE or NSE, and the shares are transferred to a special account with the clearing corporation. If you hold physical shares, you’ll need to submit original certificates and a share transfer form.

5. What Is Tanla’s Goal Form This Buyback?

Tanla’s management has been clear about their goals.

They want to return surplus cash to shareholders efficiently.

With Rs.900 crore in cash (before the buyback and dividends), they have the funds to do this without borrowing.

After the buyback, they’ll still have around Rs.700 crore in cash, which is a strong position. They also aim to improve financial ratios like EPS and return on equity (ROE).

By reducing the number of shares, each remaining share represents a bigger slice of the company’s profits. Plus, the buyback price of Rs.875 is a 34% premium over the closing price of Rs.650.

That’s a nice deal for shareholders who choose to sell.

But there’s another angle. Tanla’s stock has been under pressure, down 28% in the last year. The buyback could be a signal that the management thinks the stock is undervalued. It’s like they’re saying, “Our stock is worth more than what the market thinks.” This could boost investor confidence and stabilize the share price.

6. Comparing Tanla’s Buybacks: A Pattern?

This isn’t Tanla’s first buyback offer.

• In 2020 (12.49% of equity), they bought back shares worth Rs.154 crore at Rs.81 per share (28% premium).
• In 2022 (1.04% of equity), they repurchased Rs.170 crore worth of shares at Rs.1,200 each (44% premium).
• The 2025 (1.49% of equity) buyback, at Rs.875 per share, offers a 33% premium, wroth about Rs.175 crore.

There is a trend, right?

Tanla seems to use buybacks regularly to reward shareholders and manage capital. Each time, they’ve offered a premium, making it attractive for investors to participate.

You must have noticed that 2020, the size of buyback was 12.49% of equity. In 2025, it is much smaller at 1.49%. Why the smaller size?

Maybe Tanla is balancing growth investments with shareholder returns. Their recent AI-native platform, set to go live in Q2 FY26, could be a big cash driver.

They’re also expecting double-digit EBITDA growth in the coming years. Sounds like they’re playing a long game while keeping shareholders happy.

7. Who Should Participate in the Buyback?

Should one tender their shares or hold on?

If you need cash or think ₹875 is a good exit price, tendering makes sense. The 34% premium is tempting, especially if you bought the shares at a lower price. For example, if you bought at ₹657 (the closing price before the announcement), you’d make a neat profit of ₹218 per share.

But if you believe in Tanla’s growth story, like their new AI platform or expanding global presence, you might want to hold on.

A buyback reduces the number of shares, which could push the stock price up in the long run due to higher EPS.

Analysts too have mixed views. Some suggest applying for the buyback due to the premium, but warns the acceptance ratio might be low because of the small buyback size.

Some are pointing out that the stock is nearing a technical breakout at Rs.776. If it crosses ₹875, holding might be smarter.

As an investor, I’d weigh my financial goals. Need quick cash? Tender. Betting on Tanla’s future? Maybe holding is better.

8. It is necessary to see the bigger picture

Buybacks are becoming common, especially among cash-rich companies.

SEBI’s rules ensure transparency, requiring shareholder approval and detailed disclosures.

Companies like TCS, Wipro, and HCL have used buybacks to return capital and boost shareholder value. But not all buybacks are created equal. Some companies use them to mask weak performance, while others seem to genuinely believe in their undervaluation.

As investors, we need to read the fine print. How? We must check the company’s financials, the buyback size, and the premium offered.

For Tanla, the buyback aligns with their strong fundamentals. They’re debt-free, have high cash reserves, and serve big clients like Google and Airtel.

Their focus on innovation, like the blockchain-based Trubloq platform, adds to their appeal.

But the stock’s 28% drop over the past year raises questions. Is the market missing something, or is Tanla overhyped? That’s for you to decide.

9. How to Participate in Tanla’s Buyback

If you’re eligible and want to join the buyback, here’s what to do:

• Check Your Entitlement: Visit KFin Technologies’ website, select Tanla Platforms, and enter your demat or physical share details.
• Contact Your Broker: During the tendering period (July 29 to August 4, 2025), inform your broker how many shares you want to tender.
• For Demat Shares: Your broker will place the order on BSE or NSE and transfer shares to the clearing corporation.
• For Physical Shares: Submit original share certificates and the share transfer form (SH-4) to your broker.
• Wait for Settlement: By August 11, 2025, you’ll get payment for accepted shares, and unaccepted shares will return to your demat account.

Conclusion

I personally find Tanla’s buyback intriguing.

It’s not just about the Rs.175 crore, they’re signaling confidence in a tough market.

The 34% premium is also generous.

But this is also true that the small buyback size (1.49%) means not everyone will get their shares accepted.

If I were a shareholder, I’d probably tender a portion of my shares to lock in some profit while holding the rest for potential upside.

Tanla’s AI and blockchain ventures sound promising, but markets can be unpredictable.

I hope you got some practical perspective on share buyback. I request you to share your story or views of a buyback in the comment section below.

Have a happy investing.