SKP Securities on Tuesday said it has written to the Finance Ministry and market regulator Sebi seeking clarity on whether it can postpone or cancel its proposed buyback due to the applicability of the buyback tax. “The company has made an application with Sebi informing them about the representation filed before the Ministry of Finance and seeking clarification amongst others, on the applicability of buyback tax on the company and can the buyback be postponed or cancelled in the view of buyback tax announcement made subsequent to the commencement of buyback period, without being non-compliant of Sebi Buyback Regulations,” the company said in an exchange notification.
Last week, Greaves Cotton made a similar announcement informing investors that it has written to the Finance Ministry seeking clarification on the buyback tax introduced in the budget. Earlier this month, KPR Mill became the first company to withdraw its share buyback saying that the increased tax burden has made it unviable for the company to go ahead with its proposed ~263-crore stock repurchase plan.
To end the tax arbitrage between dividends and buybacks, the government during the Union Budget on July 5 announced a 20 per cent tax on buyback distribution. The new tax, however, has been made applicable from April 1.
The move has hit companies with ongoing and proposed buybacks. According to data provided by Prime Database, a primary market tracking firm, there are nine companies with active buyback programmes and 20 companies, which includes Wipro and Adani Ports & SEZ, that have proposed to conduct share buybacks.