SEBI has restored the open-market share buyback route via stock exchanges, effective 1 August 2026. This method was suspended in September 2024 when SEBI mandated buybacks exclusively through the tender-offer route. The reversal allows listed companies to repurchase their own shares from the secondary market during a trading window. This move aims to provide companies greater flexibility in capital management and improve secondary market liquidity, reversing a nearly two-year regulatory restriction on the exchange-based buyback mechanism.

Share buybacks are a capital-allocation tool where companies repurchase their own shares from existing shareholders, signalling confidence in their intrinsic value and returning surplus cash. SEBI historically permitted two routes: the tender-offer route (fixed price, specific window, proportional acceptance) and the open-market route via stock exchanges (companies buy from the secondary market over an extended period). In September 2024, SEBI suspended the exchange route citing concerns about price manipulation, lack of transparency, and asymmetric information — insiders knew the company was buying, giving them an edge over retail investors. The tender-offer route was seen as more equitable since all shareholders get a fair, pre-announced price. However, industry feedback highlighted that the tender-offer route is cumbersome, expensive, and less flexible for companies wanting to support their stock price during volatility. SEBI's decision to restore the exchange route from 1 August 2026 reflects regulatory recalibration — likely with enhanced guardrails such as tighter disclosure norms, blackout periods, and volume caps. For SEBI Grade A aspirants, this topic sits at the intersection of SEBI (Buy-back of Securities) Regulations 2018, investor protection principles, and secondary market microstructure — all high-frequency examination areas.