SEBI to Modify Share Buyback Rules


On March 8, the Securities and Exchange Board of India (SEBI) issued a circular outlining restriction on bid placements, price, and volume for a business seeking to buy back its shares through the exchange route.

Earlier in December, the market regulator issued a landmark regulation outlining a phased phase-out of share buybacks through the exchange channel.

Nowadays, a firm can purchase its bourse-listed shares through the tender offer and buyback routes.

In terms of stock exchange buybacks, the regulator has mandated in an operational guidance circular that no company shall purchase more than 25% of the average daily trading volume (in value) of its shares or other specified securities in the 10 trading days preceding the day on which such purchases are made.

Furthermore, SEBI has stated that corporations are not permitted to place bids in the pre-open market, as well as during the first and last 30 minutes of each trading session. The purchase order should be within 1% of the most recently traded price. In this regard, both the corporation and its appointed broker must ensure that the provisions are followed.

Acceptance of shares under buyback is a question of chance for most shareholders because shares are purchased back at the current market price. Because it is unclear whether shares are accepted under repurchase or sold in the open market, shareholders are unable to reap the benefits of buybacks.

The modified buyback regulations will take effect on March 9, according to the Securities and Exchange Board of India (Sebi).