Sebi proposes additional measures to strengthen buyback framework

Recommendations follow earlier proposal to re-introduce open market buyback through stock exchange

The Securities and Exchange Board of India (Sebi) has proposed additional measures to its earlier proposal of reintroducing open market buybacks through stock exchanges after consultation with the Primary Market Advisory Committee (PMAC). 

The earlier proposal on reintroduction of open market buybacks was floated in April. On Friday, the regulator made additional proposals after internal deliberations on the recommendations. 

Sebi has proposed allowing companies to undertake open market buybacks through stock exchanges, with a maximum completion timeline of 66 working days from the date of opening of the offer. It has proposed retaining the requirement that at least 40 per cent of the buyback size be utilised within the first half of the offer period. 

 

While the PMAC had recommended keeping the completion timeline at six months and the utilisation level at 50 per cent, the regulator noted that the framework under the Companies Act is undergoing changes under the Finance Act, 2026, with respect to the permissible gap between two buyback offers, which necessitates a balanced approach. 

The regulator further added that a six-month-long period may make buybacks irrelevant in the context of market developments and could be cumbersome for shareholders to track. 

Sebi may also direct freezing of the shares and other specified securities of the company undertaking the buyback, held by promoters and their associates, at the ISIN level during the buyback period. This is an additional safeguard, as the current regulations direct promoters and their associates not to deal in the shares of the company, including transfer of shares among promoters, from the date of the board decision till the closing of the buyback. 

The regulator has proposed removing the requirement for a separate trading window for buyback transactions and allowing such trades through the normal market mechanism. It has also proposed dispensing with the requirement to display the company’s identity as a purchaser on the trading screen. 

The proposals include introducing an explicit provision to ensure that buybacks do not result in breach of minimum public shareholding norms. 

Sebi has also proposed aligning the interval between two buyback offers with provisions under the Companies Act, 2013.

The regulator has further proposed making the appointment of a merchant banker optional. Responsibilities currently handled by merchant bankers may be reassigned to the company, stock exchanges, and secretarial auditors. 

Sebi may also mandate companies to send an intimation through electronic mode regarding the buyback offer to shareholders as on the date of the public announcement within one working day of such public announcement. At present, companies make a public announcement within two working days from the date of the results of the postal ballot for special resolution.