Sebi tightens norm for share buy back

Business

oi-Sneha

By Sneha B K

Published: Thursday, January 3, 2013, 9:43 [IST]

Market regulator, the Securities Exchange Board of India (sebi) on Wednesday tightened norms for buy back through open market purchase.

Now, the companies cannot easily fool the shareholders, investors and have to stop acting with the market.

Buyback is the process of reducing a company's shares available in the stock market. Consider buyback as a company investing in itself, or using its cash to buy its own shares.

share buyback by companies

Buy back is usually resorted to due to following reasons:

 Return surplus cash to the shareholders
 Support share price during periods of temporary weakness
 Increase the underlying share value

Following are the key proposals by Sebi:

• Companies will have to buy back a mandate of 50%as the minimum quantity.
• Companies should complete the buy back in 3 months.
• The listed companies coming out with buyback programs may not be allowed to raise further capital for a period of two years.
• Companies who are not able to buy back 100% of the proposed amount (or the proposed maximum number of shares) may not be allowed to come with another buyback for a period of atleast one year irrespective of the mode of approval for buy back.
• Buy-back of 15% or more of (paid up capital + free reserves) must be only by way of a tender offer
• Company shall disclose the number of shares purchased and the amount utilised to the exchanges on daily basis.
• Companies have to disclose on a monthly basis why the proportionate quantity was not bought during the month.

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