Sebi board rejigs rules on buyback

The country’s markets regulator will gradually eliminate share buybacks through stock exchanges by April 2025 as it works to create a more equitable process for shareholders.

The Securities and Exchange Board of India (Sebi) will create a separate window on the stock exchanges to conduct buybacks until then. The regulator also increased the minimum utilization of funds allocated for buybacks through the stock exchange to 75% from 50%.

“These amendments aim to streamline the process of buyback, create a level-playing field for investors and promote the ease of doing business,” Sebi chairperson Madhabi Puri Buch told reporters after a board meeting on Tuesday.

Sebi is reviewing several regulations and tightening corporate governance norms amid a sharp increase in frauds and underperforming initial public offerings that have hurt minority shareholders.

The regulator also reduced the timeline for the completion of buybacks through the tender offer route by 18 days. Sebi said the requirement of filing the draft letter of offer with the regulator would be eliminated, saving time for listed firms. “Over time, more and more companies will have to resort to the tender offer route. Arguably, this is a fair way and will allow all shareholders to participate,” said Yash J. Ashar, partner and head of capital markets at law firm Cyril Amarchand Mangaldas.

Sebi also approved the recommendations of a working group on improving governance standards at exchanges—new rules include increased accountability of directors, stricter investment policy and data sharing.

The Sebi board approved the proposals designed to improve governance at market infrastructure institutions, including stock exchanges, clearing corporations, and depositories. These proposals are particularly significant in light of past failures and controversies involving the National Stock Exchange and Multi Commodity Exchange (MCX).

According to Sebi, the functions of market infrastructure institutions should be divided into the three categories of critical operations; regulatory, compliance, and risk management; and other functions, including business development. The key managerial persons in charge of functions in the first two categories should have the same level of authority as those responsible for the third category, Sebi said.

Regarding board governance, Sebi said the process of appointing public interest directors (PIDs) would be streamlined by linking specific skills and expertise to PIDs. The regulator also said the internal evaluation of the performance of market infrastructure institutions and their statutory committees would be conducted annually.

The agenda items and minutes of the governing board of the market infrastructure institution pertaining to regulatory, compliance and risk management aspects need to be disclosed on the websites, Buch said.

Sebi also approved a proposal to create execution-only platforms such as Paytm and Groww for the direct sale of mutual funds. Before this, there was no clear regulatory framework for execution-only platforms.

The framework for execution-only platforms aims to provide investors with greater convenience in making investments.