India Inc’s open market buyback offers are set to resume after a year-long pause, following SEBI’s decision to revive the route.
Several industry and market veterans had flagged concerns over the suspension of open-market buyback . Former Infosys CFO and board member TV Mohandas Pai was particularly vocal, urging the Securities and Exchange Board of India (SEBI) to allow listed entities to resume buybacks to support stock prices and stabilise markets amid sharp corrections.
In a recent consultation paper, the market regulator proposed re-enabling buybacks of shares and other such securities through stock exchanges.
Change of stance
“Under the open market buyback through stock exchange, there existed a possibility that the entire purchase order of the company could get matched with the sale order placed by one or very few shareholders. There is also a possibility that other shareholders who wanted to participate in the buyback could remain deprived of such opportunity,” SEBI said.
This was viewed as contrary to the principle of equitable shareholder treatment, as acceptance was a matter of chance due to the price-time matching mechanism, rather than a fair and proportionate process.
Another major concern relating to buyback, according to SEBI, was the taxation framework. “At that time, taxation of buy-back was governed by Section 115QA of the Income Tax Act, 1961, which required the company to pay buy-back tax, with no tax liabilities in the hands of shareholders on gains made by successful participants. While some shareholders could offload their entire shareholding through matching orders without paying tax, others who wanted to participate but whose offers did not match remained deprived of tax exemptions, rendering the buy-back from open market through stock exchange inequitable from a taxation perspective,” the regulator noted.
However, the buyback offer through the tender route via bourses continued to be available for corporates, with cash-rich companies preferring this mechanism to return capital.
Buybacks dwindle
Following the restriction on open market buybacks, the number of such offers fell sharply.
In 2022, 58 companies announced buybacks, while both 2023 and 2024 saw 47 each. However, the number plummeted to 14 in 2025, and only three launched the buyback so far in 2026 despite a sharp fall in share prices. Notable companies that used the oprn market route in recent years included IEX, Emami, Natco Pharma, One 97 Communications, Bajaj Auto and ACC.
SEBI is now considering reintroducing the option for companies to buy back their shares directly from the secondary market following changes in the taxation framework that address previous imbalances.
“Accordingly, buy-back of shares or specified securities from open market through stock exchange may be re-introduced, subject to appropriate regulatory provisions and compliance mechanism. The re-introduction of this method of buy-back would provide companies with an additional mechanism for undertaking buy-back, while ensuring equitable opportunity and treatment of taxation for public shareholders,” it further stated.
So far, heavy selling by foreign portfolio investors has largely been absorbed by retail investors and mutual funds. If permitted, corporate buybacks could emerge as a key stabiliser. Their buying would also signal management’s optimism in the company’s future, thereby strengthening overall shareholder sentiment.
Free market proponents never agree with any regulatory intervention in market movements, but many now argue that the time is right to reintroduce the scheme, given SEBI’s view that recent tax changes ensure equitable treatment. However, the regulator must remain vigilant to prevent potential stock price manipulation by some greedy promoters.