Key facts
- Sebi plans to reintroduce stock exchange routes for share buybacks.
- Merchant banker appointment requirements for buybacks may be waived.
- Mutual funds may get relaxed intraday borrowing norms for cash management.
- The revised tax framework aims to ensure public shareholders are taxed on capital gains.
- Additional safeguards will be implemented, including electronic intimation to shareholders.
The Securities and Exchange Board of India (Sebi) is preparing to significantly alter its framework for share buybacks and mutual fund borrowing. At its upcoming board meeting on June 19, Sebi is expected to approve measures that could reintroduce the stock exchange route for share repurchases, a mechanism previously discontinued. This move aims to simplify the process and potentially reduce costs by waiving the current requirement for appointing merchant bankers. Additionally, Sebi is considering relaxing restrictions on intraday borrowing for mutual funds, allowing them to use these facilities for a broader range of cash management activities beyond just meeting investor redemptions.
The proposed changes to the buyback framework address concerns that led to the phasing out of the stock exchange route in 2015, including equitable shareholder participation and tax distortions. Under the new proposal, public shareholders would be taxed on their actual capital gains, aligning with normal market sale taxation. The regulator also plans to introduce safeguards such as mandatory electronic intimation to shareholders and restrictions on promoter transactions during buyback periods. Several functions currently performed by merchant bankers may be reassigned to companies, stock exchanges, and compliance officers, further simplifying the process, especially for smaller buybacks.