SEBI board reintroduces open-market buyback for corporates

The Securities and Exchange Board of India (SEBI) on Friday reintroduced the mechanism of allowing corporates to buy back shares through the open market.

At the press conference after the conclusion of its board meeting, SEBI Chairman Tuhin Kanta Pandey also announced measures to relax the transfer procedure for securities held by deceased individuals and relaxed the norms for mutual funds to borrow for managing their day-to-day expenses.

The most notable measure was the measure to allow corporate buybacks through the open market— a measure previously discontinued between 2023 and 2025 due to concerns over taxation.

Earlier, companies had to pay tax on proceeds from buybacks, effectively leading to existing shareholders not participating in the operation to also share the tax burden.

However, reforms announced in the Union Budget 2026-27, which provided for buybacks to be taxed as capital gains tax, have now allowed SEBI to reintroduce buybacks through the open market.

Currently, companies can only hold share buybacks through rigid mechanisms such as tender offer and book-building.

The new buyback through the open market, which comes into effect from August 1, is expected to allow companies more flexibility, boost liquidity in the markets, and increase investor participation in buybacks.

Story continues below this ad

However, promoters of the companies undertaking buybacks would be barred from participating to prevent them from benefiting through tax arbitrage.

“The reintroduced open market buyback through stock exchanges shall be completed within 66 working days from the opening of buyback, with at least 40% of funds earmarked shall be utilised during first half of buyback period,” Pandey said.

The SEBI also allowed mutual funds to avail the current mechanism for intraday borrowing to bridge the cash shortfall for day-to-day operations such as “pay-in/ pay-out settlement timings within asset classes, forex settlements, and payments for mark-to-market of derivative positions.”

However, these borrowings would have to be repaid by mutual funds by the end of the day, the regulator added.

Story continues below this ad

Currently, mutual funds are allowed to access the intraday borrowing facility to just meet the requirements of redemption payouts, interest payments, and for Income Distribution-cum-Capital Withdrawal obligations, wherein fund houses periodically pay out a part of the gains made by investors.

The relaxed usage criteria of the borrowing facility are expected to provide some operational breathing space for fund houses.

SEBI plans to hold discussions with market participants to understand the concerns surrounding longer-term contracts in the derivatives market.

“Will have to speak to market participants on concerns around longer-term contracts. Will have to see how we can remove barriers,” Pandey said.

Story continues below this ad

The regulator also simplified the process for the transfer of securities held by the deceased to dependents.

It introduced a new category named “quick transmission processing” to settle small-value claims more efficiently with minimal documentation. These small-value claims include up to Rs 10,000 for physically-held securities and up to Rs 30,000 for those held in a dematerialised format.

“Further, limits for simplified documentation have been doubled from ₹5 lakh to ₹10 lakh for physical holdings per listed company and from ₹15 lakh to ₹30 lakh for dematerialised holdings per beneficial owner,” the regulator added.

“We will keep an eye on the impact (of these simplified procedures), and if suggestions come in regarding further changes we can make to simplify these processes, we will then examine them,” Pandey said. “I feel the changes we have introduced will itself have a lot of benefit,” he added.