India approves stock exchange buybacks for listed companies

India’s markets regulator restored a route that lets listed companies buy back shares through stock exchanges, reopening a capital-return tool that had been shut since April 1, 2025. The framework, approved on June 19 and set to take effect on August 1, 2026, gives boards a more flexible option than tender-offer buybacks, while trying to address the shareholder-fairness concerns that led to the earlier suspension.

The key difference is how the two methods work. Tender-offer buybacks usually give shareholders a defined window to tender shares at a set price, with participation spread across eligible investors. Exchange-route buybacks, by contrast, allow companies to repurchase stock in the market in tranches, which can make execution easier over time and give management more control over timing. SEBI’s consultation paper said the exchange-based method had been discontinued because of equitable-treatment concerns and the then-prevailing taxation framework, noting that under the old system a company’s order could be matched with one or only a few shareholders while others were left out.

The new rules are designed to prevent that route from being used too aggressively. SEBI said exchange-based buybacks must be completed within 66 working days, with at least 40% of the earmarked amount deployed in the first half of the buyback period. Promoter shareholding will be locked during the buyback, and transactions that would push public float below the minimum 25% requirement are barred. The appointment of a merchant banker will be optional, a change intended to lower costs and make the process easier to use.

For companies, the appeal is clear: a buyback through the market can offer another way to return surplus cash when there is no immediate need for acquisitions or expansion. For investors, it can support liquidity and potentially buoy share prices, but regulators are also trying to preserve confidence that repurchases do not distort trading or favor insiders. That balance between convenience and fairness sits at the center of the revised framework, which gives companies another capital-allocation choice while keeping public investors protected.

The timing also matters for the market. One commentary said India Inc. had announced buybacks worth about 25,000 crore so far in 2026, the highest since 2023. Another market note said 14 companies bought back 19,711 crore last year, compared with a record 55,273 crore across 50 companies in 2017. With exchange-route buybacks back in play, listed companies may now revisit how they return cash, and how often they choose a market purchase over a tender offer.