How IT Companies like TCS is saving crores in taxes by Buyback rather than paying dividends ?
There are too many companies doing buybacks(like TCS, Wipro etc.), Do you know why they do buyback ? Today, we are going to answer this big question. To understand the whole story, lets understand What is Buyback? In simple terms, Buyback of share means Re-acquisition by the company of its own share and return money to the shareholder. Now why does the company do that? – to reward shareholders. In India, most of IT companies are promoter managed (but their is no doubt on their corporate governance) and used to fund their other ventures. A. TCS (Owned by Tatas, to fund their ventures ranging from salt to steel) B. Tech Mahindra (Owned by Mahindras, to fund their ventures ranging from automobile to hospitality) C. Wipro (owned by Azim Premji , to fund their CSR Arm and startup / investment arms Premji Invest ) How does buyback create wealth for Shareholders? – A buyback benefits shareholders by increasing the percentage of ownership held by each shareholder by reducing the to...