The Securities and Exchange Board of India (SEBI) has issued a circular titled Operational Guidance - Amendment to Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018 (“Buyback Regulations”) on 8th March 2023. The amended regulations will become effective for all buy-back offers when the company's Board of Directors approves a resolution on buy-back offers on or after 9th March 2023. The circular contains provisions related to buy-back through stock exchanges subject to the restrictions on the placement of bids, price, and volume, as specified by SEBI.
Companies undertaking buy-back through the stock exchange route must follow certain restrictions set out in consultation with stock exchanges.
Firstly, the company cannot purchase more than 25% of the average daily trading volume (in value) of its shares or other specified securities in the ten trading days prior to the day of purchase. Secondly, the pre-open market, the first thirty minutes, and the final thirty minutes of the normal trading session are off-limits for the corporation placing bids. Thirdly, the buy order price of the corporation should differ by no more than 1% from the most recent trading price. Lastly, companies are required to deposit funds in Escrow Accounts consisting of cash and/or other than cash, which would be subject to appropriate cut as per SEBI master circular for Stock Exchange and Clearing Corporations.
The amended regulations are expected to have a significant impact on companies planning to undertake buy-back offers. By placing restrictions on daily purchase, restricted timings, and buy order price limit, SEBI aims to ensure fair pricing and prevent companies from manipulating the stock price. Furthermore, the requirement to deposit funds in Escrow Accounts aims to ensure that the company has sufficient funds to complete the buy-back offer.
SEBI's move to amend the buyback regulations is in line with its mandate to protect the interests of investors and promote transparency in the securities market. By ensuring that companies comply with the regulations, SEBI aims to maintain investor confidence in the stock market and prevent fraudulent activities.
The SEBI circular on the amendment to buy-back regulations is a positive step towards ensuring fair and transparent buy-back offers. By placing restrictions on the daily purchase, restricted timings, buy order price limit, and margin requirements, SEBI aims to ensure that companies comply with the regulations and prevent fraudulent activities. The amended regulations will become effective for all buy-back offers when the company's Board of Directors approve a resolution on buy-back offers on or after 9th March 2023.