The Securities and Exchange Board of India (Sebi) has reintroduced open market buybacks through stock exchanges, effective August 1, to provide companies with an additional route for buybacks. This move aligns with the revised taxation framework and aims to enhance capital management flexibility.
Under the new framework, buybacks through stock exchanges must be completed within 66 working days, with at least 40% of the allocated funds used in the first half of the buyback period. Companies are also required to communicate buyback details directly to shareholders via email and phone messages, in addition to newspaper advertisements. Promoter holdings will remain frozen at the security level during the buyback period, and the appointment of a merchant banker is now optional to reduce compliance costs.
Sebi's board has also approved amendments to mutual fund regulations, allowing intraday borrowings to manage liquidity mismatches due to settlement timing differences, foreign exchange settlements, and mark-to-market obligations on derivative positions.
“Sebi's decision to allow two buybacks in a year aligns the regulations with the Companies Act and provides listed companies greater flexibility in capital management-critical when India Inc. has already announced buybacks worth ₹25,000 crore in 2026 so far, the highest since 2023.”
Makarand M Joshi, founder partner MMJC and Associates
Additionally, the regulator has simplified the transmission of securities and adopted a new code of conduct for its board members. These changes are expected to streamline operations and enhance accountability within the capital markets.
"Sebi's decision to allow two buybacks in a year aligns the regulations with the Companies Act and provides listed companies greater flexibility in capital management-critical when India Inc. has already announced buybacks worth ₹25,000 crore in 2026 so far, the highest since 2023," said Makarand M Joshi, founder partner MMJC and Associates, a corporate compliance firm.
The reintroduction of open market buybacks and the discretion in appointing merchant bankers for buybacks shifts responsibility to the company, stock exchanges, and statutory auditors. This move is expected to raise the bar on board-level and auditor accountability.
Background
The reintroduction of open market buybacks comes at a time when Indian companies are increasingly looking for flexible capital management strategies. With buybacks worth ₹25,000 crore already announced in 2026, the highest since 2023, this regulatory change is poised to impact corporate financial strategies significantly.
Looking ahead, market participants will be closely watching how companies adapt to these changes and the impact on shareholder value. The flexibility in buyback options and reduced compliance costs could lead to more dynamic capital management strategies across the board.
