Sebi proposes changes to buyback norms

Market


The Securities and Exchange Board of India (Sebi) on Wednesday floated a consultation paper seeking public comments on the Sebi (Buyback of Securities) Regulations 2018.The comments will be sought till 1 December 2022.

Essentially, Sebi has proposed changes with respect to the maximum limit, quantum, time period taken for completion of buybacks.

According to the consultation paper, SEBI has been receiving several suggestions and representations from market participants requesting for a review of certain substantive provisions pertaining to the buyback of specified securities, buyback through tender offer as well as from open market through stock exchange mechanism, etc.

Mainly, in order to ensure the buyback exercises remain effective of prevailing market conditions the regulator has constituted a sub-group that will be headed by Keki Mistry, the current chief executive officer and chairman of HDFC Ltd.The sub-group will also comprise members of Sebi’s Primary Markets Advisory Committee (PMAC).

The sub group will be responsible for looking at certain terms of reference including streamlining process of buybacks from open markets through the book-building process and stock exchanges, with a view to making the process more robust, transparent and efficient and shareholder-friendly.

The sub-group will also be looking at refining the process of buyback through tender offers while also reviewing timelines for buy-backs.

In terms of the current provisions in the buyback regulations,

The maximum limit of any buy-back shall be 25% or less of the aggregate of paid-up capital and free reserves of the company, based on both standalone and consolidated financial statements of the company.

With regards to this, Sebi has proposed that in the case of buy-backs undertaken through tender offers, the maximum limit shall be 40% of the aggregate paid-up capital and free reserves of the company based on the standalone or consolidated financial statements of the company, whichever sets out a lower amount, the regulator said.

Moreover, it has also proposed that the company shall ensure at least 75% of the amount is earmarked for the buy-back from the earlier 50%, as specified in the resolution of the board of directors.

The regulator has also proposed that the time period of the buyback from the current six months should be reduced to 66 working days from next year. This will later be reduced to 22 working days effective 2024, Sebi said.

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