Sebi proposes stricter guidelines on share buyback: Report

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The market regulator has been planning a complete overhaul of the share buyback guidelines done through open market route where it has proposed that companies, going for the buyback, would have to purchase at least 50 per cent of the shares it planned, said a media report.

"There is a huge gap between minimum and maximum shares bought back by companies. The proposed framework would narrow that gap as it will be between 50 per cent and 100 per cent," said M S Sahoo, secretary, Institute of Company Secretaries of India ( ICSI) and former whole-time member of Sebi.

The Securities and Exchange Board of India (Sebi) also proposed that buyback should be complete within three months instead of current practice of one year.

The guidelines proposed by Sebi, if implemented, would lead to only big players and serious entities launch buyback programmes as they will have to deposit 25 per cent of the maximum buyback amount in an escrow account upfront.

Listed companies would not be allowed to raise capital for two years and they could also face restrictions on off-market deals during buybacks, if Sebi implements its guidelines.

The move has come on the backdrop of rising cases of such buyback where companies have been failing to meet the objectives of support its share price, boost its earnings ratios or to return surplus cash to its shareholders. Moreover, some even fail to buyback a single share even after 12 months of the offer.

Story first published: Thursday, January 3, 2013, 15:30 [IST]
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