New Delhi, June 22: The Securities and Exchange Board of India (SEBI) has reversed a key policy as it has restored the open-market route for share buyback, in a move which is expected to provide listed companies with greater flexibility in returning capital to shareholders and managing balance sheets.
The new rules will come into effect from August 1, this year.
The market regulator approved the revised framework at its board meeting on June 19, reviving a mechanism that allows companies to repurchase shares directly from the secondary market through stock exchanges over a specified period.
The return of the open-market route marks a significant shift in Sebi’s approach to buyback regulation.
The mechanism had earlier been phased out amid concerns around transparency, price discovery and unequal participation among shareholders.
Since then, tender offers have remained the primary route for listed companies seeking to repurchase shares.
Unlike tender offers, which require shareholders to tender shares at a predetermined price, open-market buybacks enable companies to acquire shares gradually at prevailing market prices.
Under the revised framework, companies opting for the route will be required to complete the buyback within 60 days, creating a defined execution timeline.
The regulator has also sought to reduce compliance costs by making the appointment of a merchant banker optional.
According to SEBI, companies choosing not to appoint a merchant banker will be required to distribute associated responsibilities among internal compliance teams, statutory and secretarial auditors, as well as stock exchanges.
The move forms part of the regulator’s broader effort to improve ease of doing business while maintaining accountability standards.
Buyback Activity Gains Momentum
The regulatory overhaul comes at a time when buyback activity is witnessing a resurgence among listed companies. Market participants believe the reintroduction of open-market repurchases will expand the capital management toolkit available to corporates while potentially improving liquidity in the secondary market.
Legal and governance experts view the move as a pragmatic response to evolving market conditions, particularly as companies increasingly seek flexible methods to deploy surplus cash and enhance shareholder returns. (BVI)
