What Is An Open Offer Buyback?

A share buyback is a corporate action where a listed company uses its capital to buy its own outstanding shares from the secondary stock market. A buyback reduces the volume of shares circulating in the market. The Securities and Exchange Board of India (Sebi) announced the reintroduction of open market share buyback on June 19, 2026.

Prior to the announcement, companies were mandated to undertake all their share repurchases only through the tender offer route. Now, listed companies will be able to undertake share buyback through the open market offer route from August 1, 2026. The re-introduction aims to reduce complexities for market participants.

What Is An Open Offer Buyback?

• Under this route, a listed firm directly purchases its own shares from the secondary stock market within a predefined time frame.

• The shares are acquired at the prevailing market price through stock exchanges.

• Companies are legally required to successfully conclude the entire buyback process within 66 working days from the opening of the offer.

• Additionally, Sebi has explicitly mandated that at least 40 per cent of the total funds earmarked shall be utilised within the first 33 days.

• Company promoters and their close associates are strictly prohibited from participating in these open market buyback transactions.

Open Market Offer Vs Tender Offer

• In open market buybacks, the shares are purchased at the prevailing market price directly through stock exchanges. Under the tender offer route, a company invites existing shareholders to sell their shares on a proportionate basis at a fixed premium determined by it.

• Corporate promoters can participate in tender buybacks.

• Open market buybacks do not offer a premium to shareholders as they are executed at prevailing market prices. This is not the case with tender offers.

• Open market buybacks provide faster execution speeds. In contrast, tender offers require longer procedural timelines due to fixed pricing mechanisms and detailed verification of proportional share entitlements across all participating individual equity investors.

How It Affects Investors

• The reintroduction of the open buy back process provides regular retail shareholders an additional avenue to sell their shares directly on stock exchanges during the active buyback period, thus enhancing transparent market prices.

• Since promoter holdings remain strictly frozen, retail investors are shielded from potential internal market price manipulation.

• Taxation rules have changed significantly, completely eliminating the previous flat distribution tax paid by the issuing corporate entity.

• Now, the gains made after buybacks received by investors are treated under the capital gains tax framework depending on their period of holding.