The capital markets regulator Sebi on Wednesday placed restrictions on placement of bids, price and volume on companies going for buyback of securities through stock exchange route.
“The company shall not purchase more than 25 per cent 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,” Sebi said in a circular. Under the route, a company will not place bids in the pre-open market, first thirty minutes and the last thirty minutes of the regular trading session. Its purchase order price should be within the range of ±1 per cent from the last traded price.
All companies as well as their appointed brokers should ensure the compliance with the provisions, Sebi said, adding that the stock exchanges should monitor these compliance and in case of any non-compliance, they should impose appropriate fines or other enforcement actions as deemed fit.
On the margin requirement for deposits in an escrow account, Sebi said the escrow account shall consist of cash and/or other than the cash.
The portion of the escrow account in the form of other than the cash shall be subject to appropriate haircut.
“Merchant banker to buy-back offer is advised to ensure that the adequate amount after the applicable haircut is available in escrow account till the completion of all formalities of buy-back,” the circular said.
Last month, the markets regulator had made amendments in regulations on buy-back of securities.
In December 2022, Sebi had announced to gradually phase out buyback via stock exchange route. Besides, stock exchange route, companies can buy back securities through the tender offer route.