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SEBI On Share Buyback: SEBI, the regulator of the stock market, has decided to end the share buyback of companies through the stock exchange. In the board meeting of SEBI, the abolition of buyback through stock exchanges was approved.
SEBI’s board meeting was held on Tuesday, in which SEBI Chief Madhavi Puri Buch has now decided to give preference to the tender route by the regulator in view of the apprehension of bias in the method of share buyback from the stock market. He said, it is a gradual way forward and the present method of buyback of shares through the stock exchange will be phased out gradually.
Listed companies in stock markets buy back shares from the open market to buy shares held by investors. Apart from this, there is also a method of buyback through tender offer, which SEBI will gradually implement. SEBI has also decided in the board meeting that the companies will have to use 75 percent of the amount raised from the buyback from the stock market. Till now this limit was only 50 percent.
SEBI also said that a separate window will be started on the exchange to carry out the process of buyback till the existing system remains in place. Due to the purchase of shares in the buyback from the stock market at the current market price, the acceptance of shares for most of the shareholders is largely dependent on chance. It is not clear whether the shares have been taken under buyback or have been sold in the open market. Due to this, the shareholders are not able to claim the benefit of buyback.
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In view of these problems, the board of SEBI has approved amendment in the rules for buyback of shares. A SEBI committee headed by HDFC Vice Chairman and CEA Keki Mistry had recommended phasing out share buybacks from the open market.
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