SEBI restarts open-market share buyback, will be implemented from August 1!

Market regulator Securities and Exchange Board of India (SEBI) has approved the proposal to restart share buyback from the open-market in its board meeting on Friday. The new system will be implemented from August 1. At present, companies are allowed to do buyback through tender offer, odd-lot buyback and other structured methods. Earlier, open market buyback was stopped due to lack of transparency and equal participation to common investors.

The open market route usually allows companies to purchase shares directly from the secondary market for a fixed period of time, giving them flexibility in executing and timing the buyback. However, it has already been criticized because it does not guarantee participation of all shareholders and companies can influence market prices.

Under the new system, the time limit for open market buyback will be 60 days.

Companies often use buybacks as a tool to return excess cash to shareholders, improve earnings per share (EPS), and boost investor confidence in their future prospects. The absence of an open market route limited buyback options, especially for companies that wanted to buy shares gradually over time rather than through a fixed tender offer.

Additionally, SEBI announced a new trading system for gold and silver exchange-traded funds. This system will be implemented from September 1 and aims to ensure accurate price discovery, increase transparency and strengthen investor protection.

The regulator said the new system aims to ensure that ETF prices remain close to the value of the assets they track, and to better match the prices of domestic commodity ETFs with global markets.

Under the new rules, commodity ETFs like gold and silver will start each session with a ‘pre-open call auction’ and trade within a ‘dynamic price band’ to quickly reflect overnight changes in the global commodity market.