Stock market investors have a reason to be happy as companies will now be able to utilise more funds for share buyback offers now, reported Business Line.
Listed companies often use buybacks as a means to improve value for shareholders.
Market regulator SEBI said that it would allow listed companies to utilise 75 per cent of their surplus funds for share buybacks instead of 50 per cent earlier.
SEBI also stated that these buybacks would be slowly phased out from the secondary market exchange platforms and conducted on a separate window. This is to ensure transparency in the tender process.
“We feel the tender route is more equitable and other ways are vulnerable to favouritism,” said Madhabi Puri Buch, Chairperson, SEBI.
SEBI said it would also cut the time for share buyback to 66 days from the present 90-day period.
In the tender route, shares will be brought back by companies at premium to the market price and since the acceptance ratio too would be high it would benefit retail investors.
In a separate announcement, SEBI said market infrastructure institutions (MII) such as stock exchanges, should create separate business development and risk management verticals. The move comes nearly seven years after the NSE first got embroiled in controversy due to lapse of corporate governance at the exchange and the co-location trading scandal that led to the arrest of former exchange MD Chitra Ramkrishna.
The three different verticals of the MIIs will include critical operations like trading, second regulatory, compliance and risk management and the third being other functions.