Tender Offer vs Open Market Buyback: Key Differences Explained
Companies often buy back their own shares to improve shareholder value, optimise capital structure, or utilise surplus cash. In India, companies can repurchase shares through different methods, with the Tender Offer and Open Market Buyback being the two most common routes.
Previously, the stock exchange route for open market buybacks was discontinued from April 1, 2025. However, SEBI has reintroduced the stock exchange mechanism for open market buybacks from August 1, 2026.
If you're an investor, understanding the difference between these buyback methods can help you make informed decisions when a company announces a share buyback.
What is a Tender Offer?
A tender offer is a buyback method in which a company publicly offers to purchase shares directly from existing shareholders at a price determined by the company.
In simple terms, the company says:
"We will buy your shares at ₹X per share. Eligible shareholders can tender their shares during the buyback period."
Shareholders who are eligible can choose to participate by offering (tendering) their shares to the company.
What is an Open Market Buyback?
An open market buyback is a corporate action in which a company repurchases its own shares from the stock exchange just like any other market participant.
If shareholders wish to participate, they can sell their shares through the stock exchange. The company may purchase those shares from the market as part of its buyback programme.
Read More: How do I participate in Buyback?
Tender Offer vs Open Market Buyback: Detailed Comparison
| Particulars | Tender Offer | Open Market Buyback (Stock Exchange Route) |
|---|---|---|
| How do shareholders participate? | Shareholder offers/tenders shares to the company | The shareholder sells shares in the normal market |
| Price | The company announces a fixed buyback price | The company buys from the market at the prevailing market price, subject to the applicable framework |
| Who can participate? | Existing shareholders who hold shares on the record date | Any shareholder selling through the exchange, subject to the applicable conditions |
| Entitlement | Proportionate entitlement is determined based on shareholding | No individual entitlement |
| Small shareholders | 15% of the buy-back quantity or their entitlement, whichever is higher, is reserved for small shareholders | No such tender reservation mechanism |
| Promoters | Can participate, subject to the applicable rules and their declared intention | Promoters/promoter group cannot participate |
| Execution | Shares are tendered through the designated mechanism during the offer period | Company purchases shares through normal exchange trading |
| Investor action | Investor has to actively tender shares | Investor simply sells in the market if willing |
| Buy-back period | Offer-based process | Maximum 66 working days from opening; at least 40% of earmarked funds to be utilised in the first half |
FAQ
- What is a Buyback?
- How to Participate in a Buyback Offer?
- How will I receive proceeds from a buyback?
- Can I sell shares that I have tendered for a buyback?
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