Shares of the BSE Ltd have surged nearly 10 percent in one week following its board's announcement of a possible buyback on July 6. The company had announced the proposal in a filing with the National Stock Exchange.
BSE shares were trading at Rs 679 apiece at the closing on July 5, up 1% intraday.
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The move, if implemented, gains significance as this will be the first time in four years that the exchange is opting for a buyback. In 2019, BSE Ltd declared a buyback of its fully paid-up equity shares of Rs 2 each at Rs 680 per equity share through the tender offer route.
The total amount of the buyback size was a maximum of Rs 460 crore. The company had proposed to buy back 67.64 lakh equity shares at the offer price, representing 13 percent of the total paid-up equity capital.
A buyback, also referred to as a share repurchase, occurs when a company buys out its own existing shares to decrease the number of shares accessible for trading on the open market.
There are various reasons why companies engage in share buybacks, including enhancing the value of the remaining shares by limiting the supply or preventing other shareholders from obtaining a majority ownership position.
In a major relief to BSE, the National Stock Exchange (NSE) recently recalled its decision to shift the expiry of Nifty Bank derivative contracts to Friday from Thursday. The decision comes after the BSE decided to shift the expiry of Sensex and Bankex to Friday from Thursday following the relaunch of the indices.
"Considering the need for balanced market development and avoidance of concentration risk in the market, BSE has requested NSE to consider shifting the Bank Nifty expiry to any day other than Friday," a joint statement from the exchanges said.
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