SEBI (Securities and Exchange Board of India)

Open Market Buyback Returns in India: SEBI’s 2026 Buyback Rules, 15% Limit, 66-Day Timeline & New Compliance Framework.

Spread the love

Open Market Buyback Returns in India: SEBI’s 2026 Buyback Rules, 15% Limit, 66-Day Timeline & New Compliance Framework.

SEBI’s 2026 Buyback Regulations revive open market buybacks from August 1, 2026. Understand the 15% limit, 40% utilisation rule, 66-day timeline, promoter freeze, MPS safeguard and compliance responsibilities.

Open Market Buyback Is Back – And This Time With Stronger Guardrails

SEBI’s 2026 Buyback Regulations Bring Back the Stock-Exchange Route With Tighter Compliance, Faster Timelines and Greater Accountability

A significant development has taken place in India’s securities-market regulatory framework that listed companies, promoters, company secretaries, compliance officers, statutory auditors, secretarial auditors, legal advisers and other corporate professionals need to understand carefully.

The Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations, 2026 were notified on 1 July 2026 and came into force from 1 August 2026. The amendments have effectively brought back the open market buyback route through stock exchanges, subject to a substantially strengthened compliance framework.

The return of this mechanism is particularly important because open-market buybacks through stock exchanges had ceased to be available from April 1, 2025, following the earlier phase-out.

SEBI’s 2026 framework does not simply restore the earlier mechanism. It introduces a series of safeguards covering the quantum of buyback, utilisation of funds, timelines, promoter trading restrictions, minimum public shareholding, shareholder communication and allocation of responsibilities among the company, auditors, compliance officers, stock exchanges and other intermediaries.

The result is a framework that offers listed companies another capital-return mechanism, but with a much more structured compliance architecture.

What Is an Open Market Buyback?

A buyback is a transaction through which a company purchases its own shares or specified securities from shareholders.

Broadly, listed companies can undertake buybacks through different mechanisms permitted under the regulatory framework.

The two routes that are particularly relevant are:

Tender offer buyback
Open market buyback through the stock exchange

Under the open-market mechanism, the company purchases its shares through the stock exchange rather than inviting shareholders to tender a specified number of shares at a fixed offer price.

This distinction has important consequences.

An open-market buyback operates through market transactions and therefore involves considerations relating to price discovery, trading behaviour, promoter restrictions, utilisation of the buyback amount and market integrity.

SEBI’s 2026 framework seeks to provide this flexibility while addressing the concerns that had previously surrounded the mechanism.

Why Was the Open Market Route Discontinued?

The history of open-market buybacks is important for understanding why the 2026 framework contains stronger safeguards.

One of the concerns associated with the stock-exchange route was that, under normal price-time priority mechanisms, shareholders did not necessarily have an equal practical opportunity to participate.

A shareholder wishing to sell into a buyback could find that the company’s earmarked purchase quantity was exhausted before that shareholder’s order was executed.

This created concerns around equitable participation.

There were also significant changes in the tax treatment of buybacks over the years.

The tax framework has now changed again from April 1, 2026. Under Section 69 of the Income-tax Act, 2025, consideration received by a shareholder when a company purchases its own shares is generally dealt with under the capital-gains framework. For promoter shareholders, additional tax provisions can apply.

This shift in tax incidence is an important part of the broader environment in which the open-market mechanism has been reintroduced.

Why Has SEBI Brought It Back?

The 2026 changes can broadly be viewed as an attempt to balance two objectives:

Flexibility for listed companies

Companies with surplus cash and appropriate financial capacity may want to return capital to shareholders without necessarily undertaking a fixed-price tender offer.

Investor and market protection

At the same time, an open-market buyback can potentially affect market liquidity, price formation and promoter activity.

SEBI has therefore attached specific safeguards to the revived mechanism.

The regulator’s consultation process specifically considered the duration, utilisation requirement, merchant banker role, promoter holdings, compliance certifications and other procedural matters before the final amendments were notified.

1. Open Market Buyback Is Now Subject to a Less-Than-15% Limit

One of the most important provisions relates to the size of an open-market buyback.

With effect from August 1, 2026, an open-market buyback through stock exchanges must be less than 15% of the paid-up capital and free reserves of the company.

Importantly, the calculation is based on both standalone and consolidated financial statements.

This is significant from a compliance perspective.

The finance and company-secretarial teams cannot simply calculate the permissible amount using one set of financial statements and proceed.

The appropriate financial information needs to be evaluated carefully before the Board considers the proposal.

Why this matters

The quantum calculation should form part of the initial feasibility assessment covering:

Paid-up capital
Free reserves
Standalone financial statements
Consolidated financial statements
Existing capital structure
Debt position
Statutory restrictions
Minimum public shareholding
Other applicable buyback conditions

A buyback proposal should therefore be treated as a structured corporate transaction rather than merely a treasury decision.

2. Tender Offer and Open Market Buyback Are Not the Same

The distinction between the two mechanisms becomes particularly important under the revised framework.

Particular	Open Market Buyback	Tender Offer Buyback
Mechanism	Purchase through stock exchange	Shareholders tender shares
Permitted quantum	Less than 15% of paid-up capital and free reserves	Up to 25%, subject to applicable conditions
Price	Market-based	Fixed offer price
Execution	Stock exchange mechanism	Tender process
Small shareholder reservation	No equivalent 15% reservation	15% reservation continues
Promoter participation	Promoter holdings are subject to freeze restrictions	Promoters may tender, subject to applicable rules
Maximum open period	66 working days	Tendering period is substantially shorter
Price discovery	Market-driven	Offer price determined in advance

The choice of route therefore requires careful consideration of the company’s objectives, capital structure, shareholder profile, market conditions and compliance requirements.

3. The 40% Utilisation Requirement

One of the important safeguards retained in the framework relates to utilisation of the amount earmarked for the buyback.

At least 40% of the amount earmarked for the buyback must be utilised during the first half of the specified buyback period.

The purpose is straightforward: a company should not announce a substantial buyback and then leave the market uncertain about whether meaningful purchases will actually take place.

SEBI’s consultation paper specifically considered retaining the 40% utilisation requirement in conjunction with the revised 66-working-day maximum duration.

Compliance implication

The company should establish internal monitoring mechanisms covering:

Amount earmarked
Amount actually utilised
Number of shares purchased
Average purchase price
Remaining amount
Remaining permissible quantity
Daily exchange reporting
First-half utilisation status

Treasury, finance, compliance and company-secretarial functions will therefore need to work closely throughout the buyback.

4. The Buyback Timeline Has Been Compressed

The revised framework places considerable emphasis on speed and certainty.

The open-market buyback must be completed within 66 working days from the date of opening of the offer.

The offer is also required to open within four working days of the public announcement.

This represents a significant change from the earlier environment, where companies could have substantially longer periods to complete the process.

SEBI’s consultation paper expressly observed that a six-month period could be relatively long and proposed a 66-working-day maximum period to facilitate timely implementation.

Practical message for companies

A buyback cannot be treated as a transaction that begins after the Board meeting.

The preparation needs to begin well before the approval date.

Documentation, financial calculations, regulatory checks, depository coordination, exchange requirements, shareholder data and professional responsibilities should be mapped in advance.

5. Merchant Banker Appointment Is Now Discretionary

Perhaps one of the most consequential practical changes is that appointment of a merchant banker for the buyback is no longer mandatory in the same manner as under the earlier framework.

The company can decide whether to appoint one.

This is intended to provide greater flexibility and potentially reduce transaction costs.

However, there is an important qualification.

Removing the mandatory merchant banker does not mean removing the underlying compliance responsibilities.

Instead, relevant responsibilities are redistributed among other participants.

SEBI’s consultation documents contemplated this redistribution, with functions being assigned to the company, secretarial auditor, statutory auditor, compliance officer and stock exchanges.

6. What Happens If There Is No Merchant Banker?

If the company chooses not to appoint a merchant banker, responsibilities that would otherwise sit with the merchant banker do not disappear.

They move to designated participants under the revised framework.

Company

The company assumes important responsibility for:

Public announcement-related filings
Accuracy of disclosures
Adequacy and fairness of information
Regulatory documentation
Overall coordination of the buyback process

Secretarial Auditor

The Secretarial Auditor assumes enhanced responsibility relating to:

Due diligence
Compliance certification
Verification of compliance with applicable requirements

Statutory Auditor

The Statutory Auditor has enhanced responsibilities relating to areas such as:

Escrow arrangements
Bank guarantee matters
Relevant verification and oversight
Applicable release/invocation processes

Stock Exchanges

Stock exchanges have defined responsibilities relating to matters such as:

Sell-order adequacy
Volume-Weighted Average Price certification
Exchange-level processing and reporting

Compliance Officer

The Compliance Officer has an important role in areas including:

Extinguishment/destruction-related compliance
Presence/verification requirements
Final compliance-related reporting

The practical consequence is important.

A company that chooses not to appoint a merchant banker does not get a “lighter” compliance process. It gets a different allocation of responsibilities.

7. Promoter Holdings Face an ISIN-Level Freeze

The promoter-related provisions represent another major investor-protection safeguard.

SEBI has introduced operational requirements for freezing promoter and promoter-group holdings, including holdings of their associates, at the ISIN level during the relevant buyback period.

SEBI issued a separate circular on July 21, 2026 operationalising this freezing mechanism.

The underlying objective is to prevent inadvertent or inappropriate promoter trading during the buyback process.

What does this mean for promoters?

Promoters need to consider the restriction before the buyback process reaches the approval stage.

Liquidity requirements, planned share transfers and other proposed transactions involving promoter holdings should be reviewed in advance.

The company will also need to coordinate appropriately with the depositories and other relevant stakeholders.

Tender offer distinction

The treatment is not identical under every buyback mechanism.

Under a tender offer, the framework provides for the relevant mechanism to enable promoters to tender shares, subject to the prescribed conditions.

Therefore, the promoter strategy needs to be evaluated together with the selected buyback route.

8. Electronic Shareholder Intimation Within One Working Day

Another important disclosure-related requirement is the electronic communication to shareholders.

Companies need to ensure that shareholders who held shares on the relevant announcement date are appropriately informed electronically within the prescribed timeline.

This creates an important operational dependency on shareholder records.

Why RTA data becomes important

Companies should ensure that:

Email IDs are updated
Shareholder records are accurate
RTA data is reconciled
Demat information is properly captured
Corporate-action databases are current

A buyback therefore brings shareholder-data quality directly into the compliance workflow.

9. Minimum Public Shareholding Is a Pre-Approval Check

The revised framework specifically provides that a company cannot propose a buyback that would result in a breach of applicable Minimum Public Shareholding (MPS) requirements.

This is an important Board-level safeguard.

MPS should therefore not be checked only after the buyback has already been approved.

It needs to form part of the pre-Board feasibility analysis.

The company should model the effect of the proposed buyback on:

Promoter shareholding
Public shareholding
Post-buyback capital
Shareholding concentration
Applicable MPS requirements

A transaction that looks financially attractive could still be structurally unavailable if it would create an MPS problem.

10. Tax Treatment Has Also Changed From April 1, 2026

The regulatory story cannot be understood separately from the tax changes.

From April 1, 2026, the Income-tax Act, 2025 provides for the difference between consideration received by a shareholder and the applicable acquisition cost to be treated as capital gains when a company purchases its own shares or specified securities.

The tax treatment therefore places the tax incidence on the shareholder rather than operating under the earlier company-level buyback tax framework.

There are additional provisions for promoter shareholders.

For promoters, the law provides for additional income tax over and above the tax otherwise payable on the capital gains, with rates depending on the nature of the gain and the promoter’s status.

Why this matters for a listed company

The tax treatment should be factored into shareholder communication and transaction planning.

Companies should ensure that their advisers examine:

Resident shareholders
Non-resident shareholders
Promoter shareholders
Capital-gains computation
Applicable withholding requirements
Cost of acquisition
Treaty considerations, where applicable
Relevant disclosures

The exact tax consequences can vary according to the shareholder’s circumstances.

11. A Buyback Is Now a Cross-Functional Compliance Project

The biggest practical lesson from the 2026 framework is that buyback compliance cannot sit with one department.

A successful transaction requires coordination between multiple functions.

Board and management

Responsible for strategic approval and oversight.

Finance and treasury

Responsible for:

Funding availability
Financial calculations
Escrow arrangements
Utilisation monitoring
Capital structure analysis

Company Secretary and compliance team

Responsible for:

Board processes
Regulatory filings
Stock exchange communication
Disclosure compliance
Timeline management
Coordination with professionals

Secretarial Auditor

Responsible for enhanced due diligence and compliance certification where the merchant banker route is not used.

Statutory Auditor

Responsible for specified financial and escrow-related responsibilities.

RTA

Responsible for shareholder data and relevant corporate-action processes.

Depositories

Important for promoter holding freezes and related securities processing.

Stock Exchanges

Responsible for exchange-level processing and prescribed certifications.

The new regime therefore creates an ecosystem rather than a single-point compliance process.

12. The Strategic Decision: Merchant Banker or Internal Execution?

For companies considering an open-market buyback, one of the earliest decisions should be whether to appoint a merchant banker.

There is no universal answer.

The decision should be based on factors such as:

Size of the buyback
Complexity of the shareholder base
Company’s internal compliance capabilities
Experience of the management team
Availability of qualified professionals
Cost considerations
Transaction timetable
Regulatory complexity
Existing relationship with professional advisers

Option A — Appoint a Merchant Banker

This can provide a central professional intermediary for the transaction and may simplify coordination.

Option B — Do Not Appoint a Merchant Banker

This can potentially reduce transaction costs but requires the company and designated professionals to absorb the responsibilities redistributed under the revised framework.

The second option should therefore not be viewed simply as a cost-saving exercise.

It is also a responsibility-allocation decision.

13. A Suggested Buyback Compliance Checklist

Before approving an open-market buyback, listed companies should consider creating a comprehensive checklist covering at least the following:

Corporate eligibility

☐ Verify statutory eligibility

☐ Verify fully paid-up securities

☐ Review debt and financial ratios

☐ Check restrictions arising from defaults

☐ Review previous buyback history

☐ Check applicable cooling-off period

Quantum

☐ Calculate paid-up capital

☐ Calculate free reserves

☐ Perform standalone calculation

☐ Perform consolidated calculation

☐ Confirm less-than-15% open-market ceiling

MPS

☐ Calculate current public shareholding

☐ Model post-buyback shareholding

☐ Confirm no MPS breach

Promoters

☐ Identify promoter and promoter-group holdings

☐ Identify relevant associates

☐ Map holdings by ISIN

☐ Coordinate with depositories

☐ Implement required freeze

Documentation

☐ Board documentation

☐ Public announcement

☐ Regulatory filings

☐ Stock exchange filings

☐ Escrow documentation

☐ Bank guarantee documentation, where applicable

☐ Shareholder communication

Professional appointments

☐ Decide whether to appoint merchant banker

☐ Secretarial Auditor responsibilities

☐ Statutory Auditor responsibilities

☐ Compliance Officer responsibilities

☐ RTA responsibilities

☐ Broker/exchange coordination

Execution

☐ Opening timeline

☐ Daily purchase monitoring

☐ 40% first-half utilisation monitoring

☐ VWAP monitoring/certification

☐ Sell-order monitoring

☐ Extinguishment process

☐ Final reporting

14. Open Market Buyback vs Tender Offer — Practical Perspective

The two routes serve different practical purposes.

An open-market buyback gives the company access to a market-based mechanism and allows purchases to take place through the stock exchange.

The tender route provides a more structured invitation to shareholders at a predetermined price and includes the prescribed small-shareholder reservation.

Therefore, the decision should be based on the company’s circumstances rather than simply selecting the route with the larger numerical limit.

A proper evaluation should consider:

Capital availability + shareholder profile + market liquidity + promoter participation + MPS + tax implications + compliance resources + transaction costs + desired timeline.

15. What This Means for Compliance Professionals

The reintroduction of open-market buybacks creates a significant area of work for corporate compliance professionals.

The opportunity is not merely in preparing documents.

There is scope for professional assistance across the entire transaction lifecycle:

Buyback feasibility assessment
Regulatory eligibility review
Buyback route evaluation
Board-process support
Compliance checklists
Public announcement support
Regulatory filing coordination
Promoter holding analysis
ISIN-level freeze coordination
Shareholder-data review
RTA coordination
Stock-exchange coordination
Auditor coordination
Transaction timetable management
Compliance certification support
Post-buyback compliance
Extinguishment-related processes
Final reporting

The expanded allocation of responsibilities makes coordination particularly important where a company elects not to appoint a merchant banker.

16. Why Companies Should Start Planning Before the Board Meeting

One of the most common mistakes in regulatory transactions is beginning the compliance exercise only after the Board has approved the proposal.

The 2026 framework makes early preparation even more important.

Before the Board considers the proposal, management should ideally have clarity on:

1. Is the company eligible?

2. What is the maximum permissible buyback amount?

3. Does the proposed transaction comply with MPS requirements?

4. Which route is appropriate?

5. Will a merchant banker be appointed?

6. Who will assume each responsibility if there is no merchant banker?

7. Are promoter holdings ready for the required freeze?

8. Are shareholder records and email IDs updated?

9. Are escrow and funding arrangements ready?

10. Can the company realistically execute the transaction within the prescribed timelines?

A properly prepared transaction can significantly reduce the risk of last-minute procedural complications.

17. The Bigger Picture

The 2026 amendments represent more than simply the return of an old buyback mechanism.

They reflect a broader regulatory approach:

Flexibility for companies — combined with stronger process discipline.

SEBI has made the merchant banker appointment discretionary, but redistributed responsibilities.

It has brought back the open-market mechanism, but introduced tighter controls.

It has permitted market-based purchases, but strengthened promoter restrictions.

It has provided companies with flexibility in capital allocation, but retained minimum utilisation requirements.

It has shortened the execution period, increasing the importance of advance planning.

The message for listed companies is therefore clear:

Buyback flexibility has returned — but compliance cannot be treated casually.

Intellex Strategic Consulting Pvt Ltd — Professional Support for Listed Companies and Businesses

Intellex Strategic Consulting Pvt Ltd provides professional advisory and consulting support to businesses across India and internationally.

For companies evaluating strategic financial, corporate, regulatory and business requirements, Intellex can provide professional support and coordination across relevant areas, including corporate compliance support, financial advisory, fundraising, debt funding, equity investment, project finance, M&A advisory, financial modelling and strategic business consulting.

For listed companies considering a buyback, capital restructuring or other strategic corporate transaction, professional preparation and coordination can be critical to keeping the transaction on schedule and ensuring that the relevant stakeholders understand their respective responsibilities.

Connect With Intellex Strategic Consulting Pvt Ltd

WhatsApp: 91-98200-88394
Email: intellex@intellexconsulting.com

Our Websites

EconomicLawsPractice.com
VentureStreets.com
StartupStreets.com
CreditMoneyFinance.com
GrowMoreFranchisees.com

Intellex Strategic Consulting Pvt Ltd
Professional Services firm providing services related to this article and a wide range of strategic business, financial and corporate requirements.

Serving clients across India and supporting international business requirements.

Final Takeaway

The return of the open-market buyback route is an important development for India’s listed-company ecosystem.

But the 2026 framework should not be viewed simply as a restoration of the old system.

The new framework combines:

Market-based buybacks + a less-than-15% limit + 40% utilisation discipline + 66-working-day completion + promoter holding freezes + MPS safeguards + electronic shareholder communication + redistributed professional responsibilities.

For listed companies considering a buyback during the second half of 2026 and beyond, the most important exercise is therefore not merely deciding whether to buy back shares.

It is determining how the buyback will be structured, who will perform each compliance function, and whether the entire transaction can be executed within the regulatory framework and prescribed timelines.

The opportunity is back.

The compliance responsibility is stronger than before.

This article is intended for general informational and professional awareness purposes. Buyback transactions involve company law, SEBI regulations, securities-market requirements and tax considerations. Companies should obtain transaction-specific professional advice and verify the regulations and applicable circulars in force at the time of undertaking a buyback.