The Securities and Exchange Board of India (SEBI) has officially approved the reintroduction of open market share buybacks via stock exchanges, a significant policy shift set to take effect from August 1, 2026. This decision reverses a previous ban that was scheduled to come into force on April 1, 2025, offering renewed flexibility for Indian companies in capital management.
How Open Market Buybacks Work
An open market buyback mechanism allows a company to repurchase its own shares directly from the stock market. Unlike a tender offer, where shares are bought at a fixed price from shareholders, open market buybacks involve the company acting as a regular buyer on the exchange. Purchases are typically made gradually in smaller batches over an extended period, often several months.
The primary effect of a share buyback is a reduction in the number of outstanding shares circulating in the market. This often leads to an increase in the earnings per share (EPS) and can generally boost the value of the remaining shares, benefiting existing shareholders.
Key Regulations and Changes
Under the re-approved SEBI norms, companies can repurchase shares at any price ceiling within a 1% range over the last traded price. For instance, if a share trades at ₹200, the company can buy it back anywhere between ₹198 and ₹202.
Several critical rules govern these buybacks:
- Open market buybacks must be completed within 66 days.
- At least 40% of the allocated funds for the buyback must be utilized.
- A company cannot buy more than 25% of the average daily trading volume (in value) of its shares over the preceding ten trading days.
- Companies are prohibited from placing bids in the pre-open market, the first 30 minutes, and the last 30 minutes of the regular trading session.
Flexibility and Accountability
“SEBI’s decision to allow two buybacks in a year aligns the regulations with the Companies Act Amendment Bill, 2026 and provides listed companies greater flexibility in capital management — critical when India Inc has already announced buybacks worth ₹25,000 crore in 2026 so far, the highest since 2023.”
— Makarand M Joshi, founder partner MMJC and Associates
Makarand M Joshi, founder partner at MMJC and Associates, highlighted that the move to reintroduce open market buybacks and grant discretion in appointing merchant bankers shifts responsibility to the company, stock exchanges, and statutory auditors. This is expected to elevate board-level and auditor accountability.
SEBI also noted that due to changes in the taxation framework for buybacks and the fact that promoters are not allowed to participate in open market buybacks, these transactions will now be treated as normal trading. Consequently, the requirement for a separate trading window and displaying the company's identity as a purchaser on the trading screen has been removed, streamlining the process.