EXCLUSIVE: SEBI discussion paper soon to review Buyback Regulations; PMAC favours more than 1 buyback in a year

Companies having surplus cash may get chance to reward investors more than once in a year through buyback if Securities and Exchange Board of India (SEBI) committees' recommendations are accepted. In the recent meeting of SEBI’s Primary Market Advisory Committee (PMAC), broader proposals for discussion paper have been finalised, and soon the discussion paper will be floated and views of stakeholders will be sought.  SEBI’s policy making process is mostly through discussion papers.  

As per the people aware of the development “SEBIs PMAC has agreed to seek views on proposal to allow companies for more than one buyback in a year”. Based on the feedback received the recommendation will be made to the Ministry of Corporate Affairs.  

As per sources “Another issue to which PMAC has agreed is to seek views on, increasing the quantum of buyback”. Currently companies are allowed only up to 25% of free reserves and paid up capital. The discussion paper may seek views on this too. As IT companies association NASSCOM has pitched for increase in the limit, feedback from industry also favoured the same. Many IT companies generate huge surplus and wish to reward investors through buyback of share more often, but due to regulatory limits they are unable to do so.    

Discussion paper may seek views on other process and time limit related issues, like the reduction of timeline for open market offer method. Currently the time limit is up to six months while in tender open offer method its limited to 10 working days.  

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SEBIs is reviewing many regulations based on the feedback of stakeholders and need of the market, buyback regulation is one among the rest. The issue was first brough before the PMAC and then a working group was formed under the Chairmanship of HDFC Limited’s Vice Chairman &CEO, Keki Mistry. The said committee submitted its report recently,  based on it PMAC deliberated on proposals to be covered in the discussion paper.