The Securities and Exchange Board of India (SEBI) has unveiled a set of stringent additional measures aimed at strengthening the regulatory framework for open market buybacks. Building on an initial proposal floated in April 2026, the regulator’s latest move seeks to balance corporate flexibility with investor protection, particularly in light of recent legislative shifts in the Finance Act, 2026.
In a significant departure from previous suggestions, SEBI has proposed a much shorter completion timeline for open market buybacks through stock exchanges. While the Primary Market Advisory Committee (PMAC) had initially recommended a six-month window, the regulator has slashed this to a maximum of 66 working days. SEBI noted that prolonged offer periods often become irrelevant due to rapid market shifts and are difficult for retail shareholders to monitor effectively.
To ensure that companies remain committed to their public announcements, SEBI plans to retain the requirement that at least 40 percent of the total buyback size be utilized within the first half of the offer period. This move is designed to prevent “token” buybacks where companies announce large offers but fail to deploy significant capital.
One of the most notable safeguards introduced is the proposal to freeze the shares of promoters and their associates at the ISIN level during the buyback period. While current regulations already prohibit promoters from dealing in company shares during this time, a formal freeze through depositories would provide an automated, foolproof barrier against any unauthorized transfers or off-market deals.
Further simplifying the process, SEBI has proposed removing the requirement for a dedicated “buyback window” on stock exchanges, allowing these transactions to take place through the normal market mechanism. Additionally, the regulator intends to dispense with the requirement to display the company’s identity as a purchaser on the trading screen, fostering a more seamless execution.
The new proposals also emphasize compliance and efficiency. SEBI has introduced explicit provisions to ensure that buybacks do not accidentally breach Minimum Public Shareholding (MPS) norms. In a nod toward “Ease of Doing Business,” the regulator has even suggested making the appointment of a merchant banker optional, potentially reassigning their traditional duties to secretarial auditors and the stock exchanges themselves.
These changes are strategically timed to align with the Finance Act, 2026, which has rationalized the tax treatment of buybacks by shifting the burden to shareholders as capital gains. By tightening timelines and enhancing promoter oversight, SEBI aims to ensure that the reintroduced open market route remains a transparent and efficient tool for capital management in the Indian markets.
