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.
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.