Are Manufacturing Companies Next In Line For Buybacks?

Buybacks, also known as share repurchases, involve a company buying back its own outstanding shares from the market, effectively reducing the number of shares available to the public. Bhavya Rathod elucidates how recent buyback offer from Larsen and Toubro casts the spotlight on why manufacturing companies, following IT companies, are entering into this financial arena

- Bhavya Rathod

Amidst the bustling chaos of the Indian stock markets, a captivating financial phenomenon is taking centre-stage – buybacks! These strategic manoeuvres, once the exclusive domain of the technology-savvy IT companies, have now caught the keen eye of a new contender – the manufacturing giants. With this enticing twist in the financial tale, the question on everyone’s lips is: Will the manufacturing sector be the next to dance to the buyback rhythm, leaving investors spellbound with newfound shareholder rewards?

Step into the dazzling world of buybacks as we unravel their allure and explore why manufacturing companies are eager to join the show! In recent times, buybacks have emerged as a prominent capital allocation strategy employed by companies in the Indian stock markets. While information technology (IT) companies have been at the forefront of this trend, manufacturing companies are increasingly considering buybacks as an attractive option. In July, India’s manufacturing sector experienced further expansion compared to the previous month, as indicated by the S and P Global Purchasing Managers’ Index (PMI) data released on August 1, 2023.

The PMI slightly decreased to 57.7, down from its June value of 57.8. However, it is important to note that the manufacturing PMI has remained above the critical threshold of 50 for 25 consecutive months, signifying sustained expansion in the sector. The Indian manufacturing sector demonstrated resilience, maintaining its growth momentum as production lines continued to operate robustly, supported by a notable surge in new orders. Remarkably, the Indian manufacturing sector stands out as a top performer on the global stage, defying the prevalent demand weakness observed in other regions around the world. So what does this mean for buybacks? Before delving into this, let’s explore buybacks.