Open-market buyback set to surge as cash returns hit 3-year high

The Securities and Exchange Board of India (SEBI) has brought back the more flexible stock exchange route for open-market buybacks by listed companies at a time when India Inc is stepping up capital returns to shareholders, with buyback announcements this year already surpassing the full-year totals of the previous two years.

Companies have announced buybacks worth nearly ₹25,000 crore so far in 2026, compared with ₹19,175 crore in 2025 and ₹13,539 crore in 2024, according to Prime Database. The figure is already at its highest since 2023, when companies announced buybacks worth ₹48,452 crore before the exchange route was phased out.

Unlike the existing tender offer route, where companies repurchase shares at a fixed price during a specified offer period, the stock exchange route allows purchases directly from the market at prevailing prices over a defined period.

“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, which is critical when India Inc has already announced buybacks worth ₹25,000 crore in 2026 so far, the highest since 2023,” said Makarand M Joshi, Founder Partner at MMJC & Associates.

Pulkit Sukhramani, Partner at JSA Advocates & Solicitors, said: “Companies seeking to consolidate ownership and enhance stock value may find the open market buyback route particularly advantageous. Buybacks conducted through stock exchanges not only reduce administrative burdens but also provide greater flexibility regarding both timing and pricing.”

SEBI’s board on Friday approved reintroducing the stock exchange route for open-market buybacks from August 1 after phasing it out over the past three years. While 22 companies used the exchange route in 2022 and seven did so in 2023, every buyback announced in 2024, 2025 and 2026 has been through the tender offer route.

The earlier tax framework had made the mechanism unattractive since investors participating in buybacks were taxed at dividend tax rates, making the route less attractive than selling shares in the secondary market, where capital gains tax applied. Subsequent changes to the tax framework restored capital gains treatment for most investors participating in buybacks, removing one of the key reasons the mechanism had fallen out of favour.

The mechanism returns with tighter safeguards, including a shorter execution window of 66 working days instead of six months, a requirement to complete at least 40 per cent of the proposed buyback during the first half of the offer period, enhanced disclosures and restrictions on purchases from promoters and promoter group entities.

Companies will also have the option of undertaking buybacks without appointing a merchant banker, with the related responsibilities being shared among the company, its compliance officer, statutory auditor, secretarial auditor and stock exchanges.

The pipeline includes Wipro’s ₹15,000-crore buyback, Bajaj Auto’s ₹5,633-crore offer and Zydus Lifesciences’ ₹1,100-crore proposal, along with offers from Cyient, TeamLease Services, Kajaria Ceramics, Rolex Rings, Dhanuka Agritech, Cybertech Systems and Gandhi Special Tubes. Market participants said the revival gives companies announcing buybacks after August an additional execution option, although it is too early to assess how widely the exchange route is adopted.

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.