Sebi has reduced the timeline for completion of buy back of shares by companies to 34-44 days. Earlier, the buyback process could take anywhere between 63 and 114 days. These changes form a part of amendments made by the regulator in the Sebi (Buy back of Securities) Regulations, 1998. They have come into effect from January 3.
“The timeline for various activities involved in the buyback process have been revised, which shall result in substantial reduction of time taken for completion of buyback,” the market regulator said while announcing the changes. The regulator has also effected changes in buyback through tender offer. The decision could help the government in getting closer to its ambitious disinvestment target of Rs 40,000 crore for the current financial year.
The government has fixed a mammoth Rs 40,000 crore disinvestment target for the fiscal, but till date it has only managed to raise Rs 1,145 crore by selling its shares in the Power Finance Corporation. The state-owned companies had to put their public issues on hold in view of volatile stock markets.
But with time running out to meet the target, the government has been exploring other routes, including the buyback mode, to raise funds through disinvestment. Under the buyback mode, the government can raise money by selling its equity in the company to the PSU itself.
The Department of Disinvestment (DoD) has sought Cabinet approval to use the buyback mode for disinvestment. The government, however, could not take any decision due to inter-ministerial differences and the reluctance of PSUs to part with cash.
The DoD had also pointed out to the SEBI that the buyback norms are not in line with the principle of equitable treatment to shareholders in the acceptance of shares through tender offer. According to the earlier norms, in case of buyback the company is required to accept the shares tendered by the shareholders in proportion to the shares tendered by the shareholder and not in proportion to the shares held. However, this has been modified.
SEBI has also made changes in the record date and requirement of public notice and public announcement norms in the buyback regulations.