Treasury Stock refers to shares that a company repurchases from the open market or existing shareholders after they have been issued and sold. These shares are held by the company itself and are not considered when calculating earnings per share (EPS) or dividends, as they are no longer outstanding in the market. Treasury stock is recorded as a contra-equity account on the balance sheet, meaning it reduces total shareholders’ equity.

Companies often buy back their own shares to reduce the number of shares available in the market, thereby increasing the value of remaining shares, or to use them later for employee compensation plans or mergers. A share buyback can also indicate that a company believes its stock is undervalued. However, investors should note that holding treasury stock does not entitle the company to dividends or voting rights, as these shares are essentially dormant until reissued or retired.

From a financial management perspective, treasury stock transactions can impact a company’s liquidity and capital structure. When a company purchases its own shares, cash reserves decline, but per-share metrics like EPS may improve temporarily. This can make the stock more attractive to investors, though buybacks should be evaluated in the context of long-term financial health rather than short-term price movement.

In India, buyback activities are regulated by the Securities and Exchange Board of India (SEBI) under specific guidelines to ensure transparency and protect investor interests. Companies must disclose the purpose, size, and method of buyback clearly to the public. For investors, understanding treasury stock helps assess a company’s capital allocation strategy and financial efficiency, providing deeper insights into management’s confidence in the firm’s future performance.