A Sebi meet on various market regulations is likely to discuss share buyback regulations today. Sebi Chairperson Madhabi Puri Buch will be addressing media at 5 pm later in the day. Sebi had in November proposed measures to streamline the process of buybacks of securities from the open market in a bid to make such process robust, transparent, efficient and ┬аshareholder-friendly.
Maximum buyback limit
At present, Sebi rules provide that buyback from the open market through the stock exchange should be less than 15 per cent of the paid-up capital and free reserves of the company. It is based on both standalone and consolidated financial statements of the company. Under the proposal, Sebi consultation paper proposed to introduce a glide path with respect to the reduction in the maximum limit and the time period for completion of the buyback offer under the stock exchange mechanism, a PTI report last month suggested.
It is expected that a separate window on the stock exchange may be created for undertaking buyback through this route.
Minimum amount to be utilised
Sebi had sought public comments until December 1 on the proposals. In case of buybacks through the stock exchanges, Sebi proposed 75 per cent of the amount earmarked for the buy-back of securities is utilised for buying-back shares. At present, the present limit is 50 per cent.
Buyback timeline
A time period of six months has been provided from the date of opening of the offer for the buyback offer to be closed at present. The PTI report suggested Sebi noting that this may result in artificial demand being created for the relevant company’s shares during such an extended period of time and trading of shares occurring at an exaggerated price.
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