SEBI board decides to reintroduce open mkt share buyback from Aug 1; clears faster execution timeline

New Delhi: Markets regulator Securities and Exchange Board of India (SEBI) board on Friday decided to reintroduce open market share buybacks through stock exchanges with a faster execution timeline from August 1.

SEBI said such buybacks will be completed within 66 working days from the opening of buyback with at least 40 per cent of funds earmarked will be utilised during the first half of the buyback period. Moreover, it permits companies to execute repurchases directly through the regular trading mechanism without a dedicated buyback window.

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Reintroducing this buyback method would provide companies with an additional mechanism for undertaking buybacks while ensuring equitable opportunity and tax treatment for public shareholders.

Under the existing regulatory framework, buybacks can be undertaken through the tender offer mechanism and the open market route via book building.

"Considering the revised taxation framework applicable for buybacks, open market buyback through the stock exchange is being reintroduced with effect from August 1, 2026 to provide an additional route for the company to undertake buyback," SEBI Chairman Tuhin Kanta Pandey told reporters here after conclusion of the board meeting.

The open market method for share buybacks through the stock exchange mechanism was discontinued effective April 1, 2025, following amendments to the buyback regulations.

This method raised concerns regarding the equitable treatment of shareholders and implications arising from the then-prevailing taxation framework.

"Due to changes in the taxation framework applicable for buyback and the fact that promoters are not allowed to take part in open market buyback, now open market buyback through stock exchanges will now be treated as a normal trading transaction.

"Therefore, requirement of a separate trading window and display of the company's identity as the purchaser on the trading screen is being dispensed with," SEBI said.

Also, SEBI decided that open market buybacks through stock exchanges should be completed within 66 working days from the date of opening of the offer, instead of the earlier framework that allowed as long as six months duration.

The regulator also decided to retain the existing requirement that companies utilise at least 40 percent of the earmarked buyback amount during the first half of the offer period.

To improve shareholder communication, SEBI said there shall be dissemination of information about open market buybacks to shareholders through electronic means in addition to the public announcement being already made through newspaper advertisements.

To reduce costs and ease doing business, SEBI stated that appointing a merchant banker for buybacks is now discretionary for the company. If a company decides not to appoint a merchant banker the activities undertaken by merchant banker have been assigned to the company, compliance officer, statutory auditor, secretarial auditor, and stock exchanges.

These measures aimed at streamlining the regulatory framework governing buybacks, enhance operational efficiency and facilitate ease of doing business. It would also ensure that promoters or their associates do not inadvertently deal in shares during the buyback period, thereby strengthening investor protection, SEBI said.

Following amendments to the taxation framework introduced by the Income Tax Act, the SEBI board has approved a proposal allowing companies to repurchase shares through the regular market mechanism.

Under the new buyback taxation framework (i.e. capital gain), public shareholders would be taxed on their actual capital gains when the shares are tendered in buyback, which would be similar to selling the shares in the normal course on the stock exchange. Consequently, the differential tax advantage that existed earlier between shareholders who were able to participate in the buyback and those who were not, would not exist any longer.

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Further, shifting the tax burden from the company undertaking the buyback to the participating public shareholders has made selling in the normal market equivalent to selling via buyback through the stock exchange.

Also, the open market buyback method through stock exchanges is widely adopted in international jurisdictions.

Also, SEBI said shares or other specified securities of the company undertaking the buyback, held by promoter(s) or their associates, shall remain frozen at ISIN level during the buyback period.

The regulator also decided to insert an explicit provision to ensure that companies do not announce buybacks that might breach minimum public shareholding (MPS) norms.

Further, SEBI decided aligning the minimum interval between two buyback offers with the provisions under the Companies Act, 2013, instead of maintaining a separate timeline under buyback regulations.

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