India Reintroduces Open-Market Share Buy-Backs: What SEBI’s 2026 Changes Mean for Listed Companies

From 1 August 2026, Indian listed companies can once again buy back their shares through the stock exchange. The Securities and Exchange Board of India (“SEBI”) reintroduced this route through the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2026 (“Amendment Regulations”), after it had been discontinued with effect from 1 April 2025.

 A share buy-back is a mechanism by which a company repurchases and extinguishes its own shares, often as a means of returning surplus capital to shareholders. Indian listed companies may undertake buy-back through a tender offer or through prescribed open-market methods. The stock-exchange route allows the company to purchase shares through market order-matching rather than inviting shareholders to tender against a proportionate entitlement. Its return is therefore significant, but the 2026 framework does not simply restore the old regime: it couples the additional route with new limits, tighter timelines, direct shareholder communication, an ISIN-level freeze on promoter holdings and a different allocation of compliance responsibility.

1. Why the Open-Market Route Is Back

SEBI had phased out open-market buy-backs through the stock exchange because of concerns around equitable treatment of shareholders and the tax treatment then applicable to buy-backs. The route was fully discontinued on 1 April 2025.

That context changed in 2026. Following changes to the tax treatment of buy-back proceeds, effective 1 April 2026, SEBI concluded that the tax-induced inequity among public shareholders that had informed the earlier discontinuation had been addressed. The Amendment Regulations accordingly reopen the stock-exchange route from 1 August 2026.

Promoters and persons in control of the company continue to be excluded from selling into an open-market buy-back through the stock exchange. The restored route is therefore principally a mechanism for a listed company to acquire shares from public shareholders through the market, subject to the safeguards discussed below.

2. A Tighter Framework for Open-Market Buy-Backs

An open-market buy-back through the stock exchange must now be less than 15% of the company’s paid-up capital and free reserves, tested on both its standalone and consolidated financial statements. This is a hard structuring constraint and should be modelled before the board is asked to approve the transaction.

The offer must open within four working days of the public announcement and close within 66 working days from opening. The existing requirement to utilise at least 40% of the amount earmarked for the buy-back during the first half of the offer period has been retained. The 40% requirement is therefore not a new obligation, but it assumes fresh importance now that the stock-exchange route has been restored.

SEBI has also dispensed with the separate trading window that previously existed for this route and removed the requirement to display the company’s identity as purchaser on the trading screen. The buy-back can therefore operate through the normal trading mechanism, while continuing to remain subject to the specific price, volume, disclosure and other restrictions applicable buy-back, utilisation of earmarked amounts, promoter holdings, minimum public shareholding, and shareholder communication. Companies proposing an open-market buy-backs.

3. Merchant Banker Appointment Is Now Optional

One of the most consequential changes is new Regulation 24A, which makes the appointment of a merchant banker discretionary for a company undertaking a buy-back. This applies to buy-backs generally, not only to the reintroduced stock-exchange route.

If the company decides not to appoint a merchant banker, the underlying obligations do not disappear. They are redistributed. Among other things, the company assumes responsibility for filing the offer documents and public announcement, payment of fees, the accuracy and adequacy of disclosures, the final report, availability of funds and compliance with the Companies Act, 2013. The secretarial auditor period on the compliance and due-diligence certification; the statutory auditor oversees the escrow arrangements; the stock exchanges assume specified certification responsibilities; and the compliance officer is responsible for specified aspects of extinguishment and related certification.

For boards, company secretaries and compliance teams, the choice is therefore not simply whether to incur the cost of a merchant banker. It is whether the company has the internal governance, professional oversight and documented allocation of responsibility to perform, accurate evidence, each of the functions that would otherwise sit with that intermediary.

4. Promoter Holdings: An ISIN-Level Freeze

The Amendment Regulations also introduce a system-level restriction on promoter holdings. Shares or other specified securities held by the promoters, promoter group and their associates must remain frozen at the ISIN level from the date of the board resolution or special resolution approving the buy-back until the offer closes.

The rule applies across buy-back methods. In a tender offer, the freeze does not prevent promoters from tendering securities into the offer. The regulations also permit invocation of encumbrances created before the buy-back period, subject to the prescribed safeguards. SEBI followed the amendment with a circular dated 21 July 2026 directing depositories to put the operational framework and system changes in place before 1 August 2026.

For listed companies, this turns what was previously primarily a dealing restriction into a control that must be implemented through the depository system. The company will need to identify the relevant promoter holdings correctly and issue timely instructions so that the freeze, permitted exceptions and eventual release operate as intended.

The point is particularly important where promoter holdings are spread across multiple demat accounts or where pre-existing encumbrances exist. Those facts need to be mapped before the buy-back process begins, rather than after the approving resolution has triggered the freeze.

5. Direct Communication with Shareholders

For an open-market buy-back, the public announcement must be made within two working days from the board resolution or, where shareholder approval is obtained through a special resolution by postal ballot, from declaration of the result. The company must then, within one working day of the public announcement, send an electronic intimation about the buy-back to persons who were shareholders on the date of the public announcement.

This is a meaningful shift from relying principally on market-wide disclosure. The company must now couple the public announcement with direct shareholder communication.

In practice, this places a premium on clean shareholder data, close coordination with the registrar and transfer agent, and evidence of when and how the intimation was sent. For a time-bound corporate action, communication is now part of the compliance workflow, not merely a disclosure afterthought.

6. Minimum Public Shareholding Becomes an Express Condition

The Amendment Regulations also make minimum public shareholding (“MPS”) an express buy-back condition. A company cannot propose a buy-back that would result in a breach of the MPS requirements under the Securities Contracts (Regulation) Rules, 1957 or the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This applies to buy-backs generally and should be tested before the transaction is approved. The company will need to model the post-buy-back capital structure using its existing promoter and public shareholding, the proposed maximum buy-back and the other statutory limits applicable to the transaction.

The significance is that MPS is no longer merely an external listing constraint to be checked alongside the buy-back rules. The prohibition now sits expressly within the buy-back framework itself.

7. What Listed Companies Should Do Before Launching a Buy-Back

The revised regime makes the planning stage more important. Before announcing a buy-back, the company should first decide the route and model the permissible size against the applicable financial limits and MPS requirements.

If it proposes to dispense with a merchant banker, it should have a responsibility matrix that identifies who will perform every function reassigned under Regulation 24A, the required certification or deliverable, and the internal owner responsible for coordinating it.

Promoter and promoter-group holdings, including relevant associates and pre-existing encumbrances, should be mapped before the approving resolution so that the ISIN-level freeze can be implemented immediately and without avoidable operational issues.

For an open-market buy-back, the public announcement, one-working-day shareholder intimation, four-working-day opening deadline and 66-working-day completion period need to be built into a single execution calendar. Coordination with the stock exchanges, depositories, registrar and transfer agent and auditors should be planned around that calendar.

The company should also monitor utilisation of the earmarked amount throughout the offer period, including the 40% first-half requirement, and maintain a clear audit trail of approvals, communications, certifications, funding, trades and extinguishment. In a framework that gives issuers greater flexibility, evidence of compliance becomes correspondingly more important.

None of these steps is novel in isolation. What changes is the degree to which SEBI now expects the company itself to own the architecture of the buy-back, particularly if it chooses not to appoint a merchant banker.

That makes the 2026 amendments as much a governance change as a capital-markets change.

Conclusion

SEBI has restored an important capital-allocation option for Indian listed companies, but on redesigned terms. Open-market buy-backs through the stock exchange are back, with a less-than-15% cap, defined execution timelines, direct shareholder intimation, MPS protection and a system-level promoter freeze. At the same time, making the merchant banker optional gives companies greater flexibility only if they are prepared to assume the responsibilities that move in-house. The practical takeaway is straightforward: the new framework creates more choice, but successful execution will depend on clearer ownership, tighter coordination and disciplined compliance from the outset.

Author: Alishan Hossain

Co-Author: Amiya Mukherjee

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