SEBI Revives Stock Exchange Route for Open-Market Share Buybacks From August 1

The SEBI has revived the stock exchange route for the process of open market share buyback by the listed entities starting August 1, 2026, in view of its notification regarding the amendments in the SEBI (Buy-Back of Securities) Regulations, 2018. This framework has included an improved structure, with reduced compliance burdens and increased investor protections.

The stock exchange route had been suspended since April 2025 owing to certain issues associated with the differential treatment of shareholders and the issue of different tax treatments. However, SEBI has determined that the concerns have been resolved by now because of the amendments in the Finance Act, 2026.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Revised Rules for Open-Market Buybacks

Under the amended regulations, companies can once again undertake buybacks through stock exchanges alongside the existing tender offer and book-building methods. However, buybacks through the exchange route will be capped at 15% of a company’s paid-up capital and free reserves based on both standalone and consolidated financial statements.

The timeline has also been compressed. Companies must commence the buyback within four working days of making the public announcement and complete the exercise within 66 working days from the opening date. In addition, at least 40% of the approved buyback amount must be utilised during the first half of the buyback period.

Merchant Banker No Longer Mandatory

SEBI has also made the appointment of a merchant banker optional to lower compliance costs.

Where no merchant banker is appointed, responsibilities will be divided among the company, its compliance officer, statutory auditor, secretarial auditor and stock exchanges. These entities will oversee functions such as public disclosures, due diligence certification, escrow verification, certification of volume-weighted average price (VWAP), share extinguishment and submission of the final compliance report.

Better Protection for Investors

The regulator has put in place further measures to improve transparency and protect shareholders. Companies carrying out open-market buybacks must notify shareholders electronically within one working day of the public announcement, in addition to publishing the mandatory newspaper advertisement.

SEBI has also removed the separate buyback trading window. Buyback transactions executed through stock exchanges will now be treated as regular market trades without identifying the company as the purchaser on the trading screen.

Promoter, promoter group and associate holdings will remain frozen at the ISIN level from the date the buyback is approved until its completion, except in limited cases involving pre-existing encumbrances. Companies will also be prohibited from launching buybacks that would reduce public shareholding below the minimum regulatory requirement.

The amended regulations follow representations from industry bodies seeking the return of the exchange-based buyback mechanism after changes in the taxation framework. According to SEBI, the revised rules are intended to simplify the buyback process, improve operational efficiency and maintain adequate safeguards for investors while providing listed companies with greater flexibility in capital management.