SEBI buyback rules 2026: 66-day open market route

What SEBI has proposed

The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing a fresh overhaul of India’s share buyback framework. The latest set of suggestions follows internal deliberations and discussions in SEBI’s Primary Market Advisory Committee (PMAC), and builds on an earlier proposal to bring back open market buybacks through stock exchanges. SEBI has positioned the changes as an attempt to balance ease of doing business with stronger investor protection. The consultation paper was released on Friday, as per the provided reports.

A central element is the proposed reintroduction of open market buybacks through stock exchanges as an additional route for listed companies. This is notable because the earlier stock exchange-based open market route was discontinued from April 1, 2025, and the new proposal aims to restore it with revised safeguards and processes.

Why open market buybacks are back on the table

SEBI’s renewed push comes amid changes in the tax framework and industry demand cited in the consultation material. Under the revised framework introduced through the Finance Act, 2026, buyback proceeds will be taxed as capital gains in the hands of shareholders from April 1, 2026. The consultation paper notes that this creates parity between taxation of shareholders who participate in buybacks and those who sell shares in the open market, removing the earlier tax arbitrage.

The documents also indicate that the revised framework includes additional tax provisions aimed at preventing misuse by promoter shareholders. Against this backdrop, SEBI has argued that restoring an exchange-based route can provide companies an additional mechanism for buybacks while ensuring fair treatment of public shareholders and improving market efficiency.

66 working days: SEBI tightens the buyback timeline

One of the most specific operational changes is the proposed cap on the duration of open market buybacks through stock exchanges at 66 working days from the date of opening of the offer. PMAC had recommended allowing companies up to six months for completion via the exchange mechanism, but SEBI has proposed the shorter 66-working-day timeline.

SEBI has also said it will retain the utilisation requirement tied to pace of execution. Companies would still be required to deploy at least 40% of the earmarked buyback amount during the first half of the offer period. This requirement is intended to reduce the risk of companies announcing buybacks but executing only a small portion of the approved size.

Shareholder communication: one working day deadline

SEBI has proposed a mandatory communication requirement for buybacks. Under the draft, companies undertaking buybacks must send an electronic intimation to shareholders within one working day of the public announcement. The consultation paper specifies that the shareholders eligible for this communication would be those holding shares as on the date of the public announcement.

This proposal is designed to ensure shareholders receive prompt information and can assess participation decisions with timely disclosures, particularly in fast-moving market conditions.

Trading mechanics: separate window versus normal market

A major operational change proposed in the Friday consultation paper is the removal of the requirement for a separate trading window for open market buybacks executed through stock exchanges. SEBI has proposed allowing buyback transactions to take place through the regular trading mechanism of stock exchanges.

SEBI has linked this change to the reduced relevance of tax distinctions between buyback participants and regular market sellers after the tax framework changes referenced in the consultation material. At the same time, some earlier consultation language referenced execution through a separate buyback window as provided in the Buyback Regulations, highlighting that SEBI’s latest direction is to move away from a dedicated window and simplify execution through the normal market mechanism.

Promoter safeguards: freezing holdings at ISIN level

To strengthen safeguards against misuse, SEBI has proposed freezing promoter and promoter group holdings at the ISIN level during the buyback period. The paper notes that current regulations already prohibit promoters and their associates from dealing in company securities during the buyback period, including through off-market transfers.

Under the proposed approach, companies would be responsible for issuing instructions to depositories to implement the freeze. SEBI has also clarified an exception: the freeze would not apply for the limited purpose of allowing promoters to tender shares in buybacks conducted through the tender offer route.

Minimum public shareholding: explicit bar on breaches

SEBI has proposed introducing an explicit provision to ensure that listed companies do not undertake buybacks that breach minimum public shareholding (MPS) requirements. While MPS norms are governed under the Securities Contracts (Regulation) Rules, 1957 and SEBI’s listing regulations, the existing buyback regulations do not contain a direct provision linking buyback approvals to MPS compliance.

Under the proposed amendment, companies would be barred from announcing buybacks if the transaction could reduce public shareholding below the prescribed threshold. The consultation paper states that this would apply to both tender offer and open market buyback routes.

Merchant bankers may become optional

SEBI has also proposed removing the mandatory requirement to appoint merchant bankers in buyback transactions. The regulator has said that many functions performed by merchant bankers are procedural and can now be carried out by companies themselves or by market infrastructure institutions such as stock exchanges.

Under the proposed framework, responsibilities would be redistributed among companies, designated stock exchanges, compliance officers, and secretarial auditors. This change is framed as an ease-of-doing-business measure, while still relying on market infrastructure and audit roles for process checks.

Cooling-off period: alignment with the Companies Act

Another proposed change is to align the mandatory interval between two buyback offers with the provisions of the Companies Act, 2013. Currently, the buyback regulations prohibit companies from undertaking another buyback within one year of the expiry of the previous buyback period.

SEBI has said that aligning with the Companies Act would ensure consistency and automatically incorporate future legislative changes without requiring separate amendments to SEBI regulations.

Key proposals at a glance

Consultation timelines in the documents

The provided reports mention multiple consultation windows across releases. One report states SEBI invited comments until April 23, 2026 on the proposal to reintroduce the open market route through stock exchanges. Another report, referring to the Friday consultation paper that includes broader operational changes, states SEBI has invited public comments until May 29.

Why this matters for investors and listed companies

For listed companies, the combination of a tighter execution timeline and the ability to transact through the regular trading mechanism could change how open market buybacks are planned and implemented. For shareholders, the one-working-day electronic intimation requirement is designed to improve access to information, and the explicit MPS guardrail attempts to prevent outcomes that would conflict with minimum public float requirements.

For market integrity, the proposed promoter holding freeze at the ISIN level adds a systems-based restriction during the buyback period. And on compliance costs, making merchant banker appointments optional could reduce mandatory intermediation for certain buybacks, while reallocating duties to exchanges, compliance officers, and secretarial auditors.

Conclusion

SEBI’s consultation package proposes to restore the open market buyback route through stock exchanges while tightening timelines, sharpening promoter safeguards, and adding explicit checks such as MPS compliance. The regulator has also proposed faster shareholder communication and a shift away from mandatory merchant banker appointments for buybacks. Next steps depend on stakeholder feedback within the consultation timelines cited in the documents, after which SEBI may finalise amendments to the SEBI (Buy-Back of Securities) Regulations, 2018.