Explained: Open market share buybacks are back, what this means for Indian investors

Market regulator Sebi has approved norms to re-introduce open market buybacks through stock exchanges. In a buyback announced via an open market mechanism, a company repurchases its shares in the open market or through the stock exchanges. This decreases the number of circulating shares and generally boosts the value of the remaining shares. 

The company acts like a regular buyer on the stock exchange, buying shares gradually in smaller batches over a set period (often spanning over several months). 

As per SEBI, a firm can repurchase its shares at any price ceiling within the 1% range over the last traded price.

For example, if the last traded price of company’s share is Rs 200 on Monday, the shares can be repurchased at any price between Rs 98 to Rs 202.

Earlier, Sebi had banned the open market buyback of shares through stock exchange mechanism from April 1, 2025. Now, with the market regulator reintroducing share buybacks via stock exchanges, the same will come into effect from August 1 this year. Open market buyback should be completed in 66 days with at least 40% of funds allocated funds must be utilised.

As per Sebi norms, a company cannot buy more than 25% of the average daily trading volume (in value) of its shares or other specified securities in the ten trading days preceding the day in which such purchases are made. Further, it cannot place bids in the preopen market, the first 30 minutes and the last 30 minutes of the regular trading session. 

Makarand M Joshi, founder partner MMJC and Associates said, "SEBI’s decision to allow two buybacks in a year aligns the regulations with the Companies Act Amendment Bill, 2026 and provides listed companies greater flexibility in capital management — critical when India Inc has already announced buybacks worth Rs 25,000 crore in 2026 so far, the highest since 2023. The move to reintroduce open market buybacks and discretion in appointment of merchant bankers for buybacks shifts responsibility to the company, stock exchanges, and statutory auditors. This would raise the bar on board-level and auditor accountability."

"Due to changes in the taxation framework applicable for buy-back and the fact that promoters are not allowed to take part in open market buy-back, now open market buy-back through stock exchanges will be treated as normal trading transaction. Therefore, requirement of a separate trading window and display of the company's identity as purchaser on the trading screen is being dispensed with," Sebi said.