After TCS buyback proposal, Sebi may amend buyback regulations in board meeting this week

IT-giant Tata Consultancy Services has brought buyback in limelight with its announcement of another major proposal of Rs 16,000 crore last week. This would be TCS second buyback in one year. A similar amount buyback was made last year in May month. With latest news circulated it is being known that market watchdog Sebi is planning to amend the buyback regulations. It is being known that Sebi would look to bring in more clarity on various aspects which will include even requirement for public announcement.

A company makes a buyback or repurchase shares from its existing shareholders usually at a market price or premium. One of the common objective of adapting this portal is to control the drop in the value of a company's stock price – by reducing the supply of stock. This in return drives price-over-equity (PE) ratio and also improves the earnings per share (EPS) of a company.

According to a PTI report, the watchdog has carried out a review of the current buyback norms in order to simplify the language, remove inconsistencies and update the references to the new Companies Act that came into force in April 2014.

A senior official told PTI, “definition of buyback period and clarity on the requirement to make public announcement for buyback offer after declaration of postal ballot results would be provided in the amended regulations.”

Apart from the above, Sebi may look to give a new explanation to free reserves in line with with Companies Act, 2013 under the new framework.

Reportedly, the official explained that, 'buyback period' would be defined as the time between date of authorisation for buyback by a company's board of directors and the date on which the payment is made to shareholders who have accepted the offer.

In the month of March of this year, a discussion paper was issued on new buyback regulations.

According to the official, the discussion paper saw more than 150 comments from various entities and taking this into consideration a new regulation will be prepared.

Major changes that can take place in the new buyback regulation would be requirement for public announcement, free reserves, shares given for repurchase and timeline with respect to requirement of buyback.

This new revised framework can be expected to be discussed during Sebi’s board meeting which is scheduled on June 21, as per the official.

Currently, a company may buy back its shares or other specified securities by any one of the following methods: -

(a) from the existing (shares or other specified securities) on a proportionate basis through the tender offer - open market, book-building process,stock exchange and from odd-lot holders.

A company shall not buy back its shares or other specified securities  from any person through negotiated deals, whether on or of the stock exchange or through spot transactions or through any private arrangement.

Any person or an insider shall not deal in securities of the company on the basis of unpublished information relating to buy back of the company.