Capital markets regulator Securities and Exchange Board of India has proposed a sweeping overhaul of buyback regulations for listed companies, including reintroducing open market repurchases via stock exchanges, easing procedural requirements and tightening investor safeguards.

Buybacks — where companies deploy surplus cash to repurchase their own shares — are widely seen as both a capital allocation tool and a signal of management’s confidence in undervaluation.

The proposals, outlined in a consultation paper released on Friday, aim to “review and rationalise” the existing framework while improving ease of doing business and ensuring the timely execution of buyback programmes.

A key change is the proposed reintroduction of open market buybacks through stock exchanges, a route that was discontinued in April 2025. The Primary Market Advisory Committee (PMAC) has argued that the earlier rationale for discontinuation — linked to differential tax treatment — has weakened following changes that tax buybacks as capital gains in the hands of investors.

However, Sebi has diverged from the committee on timelines. While PMAC recommended allowing up to six months for completion of buyback offers, the regulator has pitched a tighter window of 66 working days, citing the need to maintain relevance and avoid prolonged market overhang.

To enhance transparency, Sebi suggested mandating companies to electronically inform shareholders of buyback offers within one working day of the public announcement.

On the governance front, the regulator has suggested freezing promoter and promoter group holdings at the ISIN (international securities identification number) level during the buyback period, with limited exemptions for participation through the tender offer route.

It has also proposed explicitly linking buybacks with minimum public shareholding (MPS) norms to prevent any breach of regulatory thresholds.

Further, Sebi has proposed aligning the mandatory gap between two buybacks with provisions under the Companies Act, 2013, replacing the current one-year restriction to ensure regulatory consistency.

In a bid to reduce compliance costs, the regulator has proposed making the appointment of a merchant banker optional. Sebi has invited public comments on the proposals until May 29, signalling a broader push to modernise capital management practices while retaining investor protection.