Stock market investors can cheer since companies will be able to utilise more funds for share buyback offers now. Listed companies use buybacks as a means to improve value for shareholders.

On Tuesday, market regulator SEBI said it would allow listed companies to utilise 75 per cent of their surplus funds for share buybacks instead of 50 per cent earlier. This would simply mean that the acceptance ratio in the buyback offers will rise. Each year, companies announce thousands of crore worth of buyback offers.

SEBI has said 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.

Trading hours

Buch also said that SEBI had no restrictions on the extension of market trading hours. On Monday, National Stock Exchange chief Ashish Chauhan had proposed longer hours for India’s stock market to counter Singapore, which holds the dominance in Nifty futures trading.

In another major announcement SEBI said that market infrastructure institutions (MII), like 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. 

Three verticals

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. The first two will see higher resource allocation, SEBI said. Further, the MIIs will have to disclose minutes of board meetings regarding regulatory, compliance and risk management on their website.

“Three verticals, with arm’s length can curb the conflict of interest that could have arisen earlier between the functioning of officials. Exchanges can have separate key management persons with no overlapping roles for each of the verticals,” said JN Gupta, former ED of SEBI, who was part of a committee who recommended these rules.