Brief about Share Buyback – SEBI Regulations & Guidelines

Another name for share repurchase is share buyback. A buyback is a process by which a business repurchases shares from the open market. Either the tender offer process or open market purchases can be used to execute a buyback.

To safeguard the interests of securities investors, SEBI has outlined the rules that a corporation must follow when buying back shares. Check out the SEBI’s share buyback guidelines. Below are main key points of Buy Back of share Securities and Exchange Board of India guidelines and related regulation

Buyback of Share – SEBI Regulations & Guidelines

1. SEBI (Buyback of Securities) Regulations, 2018: The SEBI (Buyback of Securities) Regulations, 2018 provides the regulatory framework for share buybacks in India.
2. Types of Buybacks: SEBI regulations distinguish between two types of buybacks:
   • Tender Offer: The company makes a public announcement to buy back shares from existing shareholders.
   • Open Market: Shares are bought from the market through stock exchanges.
3. Maximum Buyback Size:
   • The maximum buyback size is capped at 25% of the aggregate of paid-up capital and free reserves of the company.
4. Minimum and Maximum Buyback Price:
   • The minimum buyback price must be the higher of the:
     • Two weeks’ average closing price of the securities on the stock exchange.
     • The highest price paid by the company for any previous buyback.
   • The maximum buyback price is capped at 25% over the aforementioned average.

5. Buyback Period:

   • The buyback process must be completed within a period of 12 months from the date of the board resolution.
6. Public Announcement:
   • The company must make a public announcement about the buyback and provide details such as the number of shares, the price, and the maximum amount earmarked for the buyback.
7. Registrar to the Buyback:
   • The company must appoint a registrar to the buyback.
8. Reporting Requirements:
   • Companies are required to disclose details of the buyback in their annual reports and other regulatory filings.
9. Prohibition on Further Issuance:
   • Companies cannot make further issuances of the same kind of securities for a specified period after the completion of the buyback.
10. Conditions for Open Market Buyback:

• There are specific conditions and restrictions for companies opting for the open market method.

11. Post-Buyback Public Announcement:
    • The company must make a post-buyback public announcement within two days of the completion of the buyback.

While shareholders can submit their shares during the buyback offer under a tender offer, the firm buys shares back from the secondary market via an open market arrangement.

Buying again shares can be a useful strategy for increasing an organization’s undervalued stock price and lowering dilution. Every share buyback does not always result in profits for shareholders. Thus, it’s always a good idea to look up the company’s past performance before making a choice.