SEBI Revives Open Market Buybacks Through Exchanges From August 1

The Securities and Exchange Board of India (SEBI) has approved the reintroduction of open market share buybacks through stock exchanges, bringing back a capital distribution route that had been discontinued in April 2025. The mechanism will become available from August 1, 2026, under an updated framework aimed at strengthening investor protection and improving operational efficiency.

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Announcing the decision after its board meeting, SEBI said open market buybacks would be available as an additional option alongside the existing tender offer route. The regulator said changes in the tax structure have removed the disparity that earlier existed between different buyback methods, making the mechanism viable again.

Under the revised rules, companies undertaking open market buybacks will have to complete the process within 66 days. At least 40% of the amount earmarked for the repurchase must be utilised.

Safeguards for Promoter Holdings

SEBI has introduced restrictions to prevent misuse of the route. Promoter and promoter group holdings will remain frozen at the ISIN level during the buyback period. While promoters can continue participating in tender offer buybacks, they will not be able to trade in company securities during open market repurchase programmes.

Listed companies will also be required to inform shareholders electronically within one working day of making the public announcement. The communication will be sent to investors holding shares on the date of the announcement.

Another operational change relates to execution. Buyback transactions through stock exchanges will now be carried out through the regular trading mechanism, eliminating the need for a separate trading window. SEBI said the dedicated window had been introduced earlier because of differences in tax treatment, which are no longer relevant.

Alignment With Existing Regulations

The market regulator said companies will not be permitted to undertake buybacks if the transaction results in a breach of minimum public shareholding norms. It also decided to align the cooling-off period between two buyback offers with provisions under the Companies Act, 2013.

SEBI has removed the requirement for mandatory appointment of merchant bankers for buyback transactions. Several procedural responsibilities will now shift to listed entities, stock exchanges, compliance officers and secretarial auditors.

The India Inc., on its part, has announced share buyback deals worth nearly ₹25,000 crore for the year 2026, the highest so far since 2023.

In his comment on the development, Makarand M. Joshi, Founder Partner at MMJC and Associates, said that the amendments were consistent with the Companies Act Amendment Bill, 2026. He told the media that the revised framework also places greater accountability on company boards and auditors.

The return of open market buybacks marks a significant change in India’s capital market framework, giving listed companies another avenue to distribute surplus cash while operating under tighter regulatory safeguards.