The Securities and Exchange Board of India (SEBI) has approved the reintroduction of share buybacks through stock exchanges, allowing companies to repurchase their own shares in the open market starting August 1, 2026, while capping the execution period at 66 working days. As reported by The Hindu BusinessLine, this decision comes at a time when buyback announcements in 2026 have already surpassed the full-year totals of the previous two years, with companies announcing buybacks worth nearly ₹25,000 crore so far in 2026, compared with ₹19,175 crore in 2025 and ₹13,539 crore in 2024. The figure represents the highest level since 2023, when companies announced buybacks worth ₹48,452 crore before the exchange route was phased out. Unlike the existing tender offer route, where companies repurchase shares at a fixed price during a specified offer period, the stock exchange route allows purchases directly from the market at prevailing prices over a defined period, providing greater flexibility regarding both timing and pricing.
The amended framework introduces several operational improvements to streamline the buyback process. Companies undertaking buybacks through stock exchanges will be required to complete the process within 66 working days from the opening of the buyback, with at least 40% of the earmarked funds must be utilised during the first half of the buyback period. To prevent inadvertent dealings during the buyback period, shares and other specified securities held by promoters and their associates will remain frozen at the ISIN level throughout the buyback period. The regulator has made the appointment of a merchant banker optional for companies undertaking buybacks, with related responsibilities handled by the company, compliance officer, statutory auditor, secretarial auditor and stock exchanges where a merchant banker is not appointed. The framework also requires buybacks to comply with minimum public shareholding norms and the interval between two buybacks has been aligned with the provisions of the Companies Act, 2013.
According to Deepak Shenoy, founder and CEO of Capitalmind Mutual Fund PMS, SEBI's decision to allow open-market share buybacks from August 1 is expected to provide companies with greater flexibility in returning capital to shareholders. As reported by The Hindu BusinessLine, Shenoy argues that buybacks are often a more efficient way of returning cash to shareholders than dividends, as dividends distribute profits across the same number of shares while buybacks reduce the share count, allowing future earnings to be spread over fewer shares and potentially boosting earnings per share. The tax treatment has become more favourable, with dividends taxed as income potentially attracting rates as high as 36% for some taxpayers, while gains from shares sold in the market are subject to capital gains tax rates of 12.5% for long-term holdings and 20% for short-term holdings. Shenoy notes that recent tax changes have removed much of the complexity that made market buybacks cumbersome under the previous regime, enabling SEBI to reintroduce market buybacks in a simplified form without requiring dedicated buyback trading windows or merchant banker involvement.
The revival of the stock exchange route has generated significant interest among major corporations, with Wipro's ₹15,000-crore buyback, Bajaj Auto's ₹5,633-crore offer and Zydus Lifesciences' ₹1,100-crore proposal leading the pipeline. Additional offers include Cyient, TeamLease Services, Kajaria Ceramics, Rolex Rings, Dhanuka Agritech, Cybertech Systems and Gandhi Special Tubes. As reported by The Hindu BusinessLine, 22 companies used the exchange route in 2022 and seven did so in 2023, but every buyback announced in 2024, 2025 and 2026 has been through the tender offer route. Market participants noted that '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,' according to Makarand M Joshi, Founder Partner at MMJC & Associates. The mechanism returns with tighter safeguards, including a shorter execution window of 66 working days instead of six months and enhanced disclosures.
The revival of open-market buybacks is attributed to subsequent changes to the tax framework that restored capital gains treatment for most investors participating in buybacks, removing one of the key reasons the mechanism had fallen out of favour. As reported by The Hindu BusinessLine, the earlier tax framework had made the mechanism unattractive since investors participating in buybacks were taxed at dividend tax rates, making the route less attractive than selling shares in the secondary market, where capital gains tax applied. The mechanism returns with tighter safeguards, including a shorter execution window of 66 working days instead of six months, a requirement to complete at least 40% of the proposed buyback during the first half of the offer period, enhanced disclosures and restrictions on purchases from promoters and promoter group entities. The regulator has already implemented enhanced risk management, monitoring and surveillance measures to strengthen the derivatives segment.
On regulatory enforcement matters, Pandey acknowledged the limitations of preventing all market misconduct, noting that 'It is not possible to prevent every instance of egregious behaviour in the markets' as reported by The Financial Express. He emphasized the need to improve the timing and data efficiency of SEBI's surveillance and response systems to better detect and respond to market irregularities when they occur. 'The question is how do we improve our timing, how do we improve our capacities, how do we improve our system and data analytics in order to catch manipulations,' Pandey stated, adding that it is not possible to prevent such incidents entirely. The regulator has already implemented enhanced risk management, monitoring and surveillance measures to strengthen the derivatives segment.
