The Securities and Exchange Board of India (SEBI) is looking to overhaul the existing framework for share buybacks, aiming to make the process more efficient and transparent for investors.
In a recently released consultation paper, the markets regulator proposed several significant changes, including the re-introduction of open market buybacks through stock exchanges and a drastic reduction in execution timelines. SEBI has suggested that open market buybacks should be completed within 66 working days from the start of the offer, a sharp move away from the previous six-month window. The regulator noted that the longer duration often rendered buybacks less relevant as market conditions shifted during the extended period.
One of the key investor-centric proposals is the mandatory electronic communication of buyback offers. Companies would be required to notify all shareholders via email within one working day of the public announcement. This move is designed to ensure that retail investors are promptly informed and can make timely decisions regarding their holdings.
Additionally, SEBI has proposed doing away with the separate trading window for buybacks, suggesting that transactions instead be executed through the normal market mechanism. This shift reflects the fact that the tax distinction between buyback participants and regular market sellers has largely been eliminated.
To protect the interests of minority shareholders and maintain market integrity, the regulator has proposed freezing promoter shareholdings at the ISIN level during the buyback period to prevent any trading activity by them. There is also a new provision to ensure that buybacks do not lead to a breach of the minimum public shareholding (MPS) requirements.
In a bid to simplify the process for companies and promote ease of doing business, SEBI has suggested making the appointment of merchant bankers optional. Instead, responsibilities such as filing offer documents and managing escrow operations could be handled directly by the companies and stock exchanges.
The regulator has invited public feedback on these proposals until May 29, ensuring that the final framework balances the ease of doing business for corporations with robust safeguards for minority shareholders.
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