In a major shift for the markets, the Securities and Exchange Board of India (SEBI) has approved the reintroduction of open market share buybacks through stock exchanges, effective Aug. 1.
The move reverses an earlier decision to phase out this route and is expected to provide greater flexibility to companies while offering investors another opportunity to exit their holdings.
What Is A Share Buyback?
A share buyback is when a listed company buys back its own shares from existing shareholders. The repurchased shares are typically cancelled, reducing the total number of outstanding shares in the market.
Why Has SEBI Brought Back Open Market Buybacks
Previously, open market buybacks allowed companies to repurchase shares directly from the secondary market over time. The route was phased out due to differences in tax treatment and potential inequities between participating and non-participating shareholders.
With revisions to the taxation framework (buybacks now taxed more uniformly), SEBI has restored this option as an additional route alongside the popular tender offer method. The aim is to reduce costs, speed up execution, support share prices during volatility, and provide companies with efficient capital allocation tools.
How Open Market Share Buybacks Work
Unlike a tender offer, where shareholders choose to sell their shares back to the company at a predetermined price, an open market buyback takes place through normal stock market trading. The process typically unfolds as follows:
The company announces the buyback, outlining the maximum number of shares or the total amount it intends to repurchase, along with the duration of the programme.
Who Can Participate
Anyone who owns the company's shares can participate in an open market buyback.
But there is no guarantee the company will buy your shares. Since purchases happen through normal market trading, your order will only be executed if it matches a buyer—including the company or another market participant.
ALSO READ: SEBI Exempts Vadilal Promoter Trust From Open Offer For Stake Transfer
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