Markets regulator SEBI on Friday proposed a series of amendments to the buyback framework, emphasizing the reintroduction of open market share buybacks through stock exchanges and the reduction of execution timelines.
In a consultation paper, SEBI suggested that open market buybacks should conclude within 66 working days from the offer’s opening date, in contrast to the previous timeframe of up to six months. The regulator indicated that the six-month period, as advised by the Primary Market Advisory Committee (PMAC), seemed “relatively long” and could diminish the relevance of buybacks in fluctuating market conditions.
Additionally, SEBI intends to maintain the existing requirement for companies to utilise a minimum of 40 percent of the designated buyback amount during the initial half of the offer period.
To enhance communication with shareholders, SEBI recommended that companies must electronically notify all shareholders, as of the public announcement date, about the buyback offers within one working day of such announcements.
The regulator also proposed eliminating the previously mandated separate trading window for open market buybacks via stock exchanges. SEBI noted that buyback transactions could be performed through the standard trading mechanism, as tax distinctions between buyback investors and regular market investors have been removed.
Furthermore, SEBI suggested freezing shares or specified securities held by promoters and their associates at the ISIN level during the buyback period, although this freezing would not apply to shares tendered in buybacks carried out via the tender offer route.
An explicit provision was also proposed to prevent companies from announcing buybacks that might breach minimum public shareholding (MPS) regulations.
SEBI further proposed aligning the minimum interval between two buyback offers with the stipulations of the Companies Act, 2013, rather than enforcing a distinct timeline under buyback regulations.
To foster ease of doing business, SEBI advised dispensing with the mandatory appointment of merchant bankers for buybacks. Responsibilities currently managed by merchant bankers, such as filing offer documents, disclosures, and escrow-related tasks, could instead be assigned to companies, stock exchanges, compliance officers, and secretarial auditors.
The Securities and Exchange Board of India has invited public comments on these proposals until May 29.
