Mumbai, June 19: The Securities and Exchange Board of India (SEBI) approved the resumption of open-market share buybacks during its board meeting on Friday. This new system will take effect on August 1.
Currently, companies are allowed to conduct buybacks through tender offers, odd-lot buybacks, and other structured methods. Open-market buybacks were previously halted due to concerns over transparency and the lack of equal participation for retail investors.
Through the open-market route, companies can directly purchase shares from the secondary market within a specified timeframe, making it easier for them to implement buybacks and choose the timing. However, this method has faced criticism for not guaranteeing participation from all shareholders and for potentially influencing market prices.
Under the new system, the timeframe for open-market buybacks will be 60 days. Companies often use buybacks as a tool to return excess cash to shareholders, improve earnings per share (EPS), and build investor confidence in future prospects. The absence of the open-market route had limited buyback options, especially for companies looking to gradually acquire shares over time rather than through a fixed tender offer.
Additionally, SEBI announced a new trading system for gold and silver exchange-traded funds (ETFs), set to launch on September 1. This initiative aims to enhance price discovery, increase transparency, and bolster investor protection.
The regulator stated that the new system seeks to ensure that ETF prices remain close to the value of the assets they track, while also aligning domestic commodity ETF prices more closely with global markets.
Under the new rules, commodity ETFs like gold and silver will begin each session with a ‘pre-open call auction’ and will trade within a ‘dynamic price band’ to reflect overnight changes in the global commodity market.
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