To reduce the overall time taken for the completion of open and buyback offers, markets regulator Sebi has suggested changes in the timelines for procedural activities, including a lesser time period for tendering shares.
A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available on the open market. An open offer is a secondary market offering, similar to a rights issue. In an open offer, a shareholder is allowed to purchase stock at a price that is lower than the current market price. The purpose of such an offer is to raise cash for the company efficiently.
The proposed changes would bring down the overall time taken for completion of open offers to 42 working days from the current 62 working days, while in the case of buyback offers, the time period will reduce to 36 working days from 43 working days at present.
According to Sebi, the changes would be “investor-friendly and make the process more efficient”.
In this regard, the watchdog has issued a consultation paper, and public comments have been sought on it till April 15.
“Considering the technological advancements in digital and fin-tech and changes made in the manner of tendering and settlement of shares, a need was felt to review the overall timelines for procedural activities, including the duration of the tendering period, involved in the open offers and buy-back tender offers,” it said.
Further, Sebi noted that the changes would also help conclude the offers in a more efficient and time-bound manner and to synchronise the timelines of similar activities across all the tender offers to the extent possible.
Among other changes, the regulator has proposed the period for tendering shares in an open offer to 10 working days from the date of receiving comments from Sebi and would remain open for 5 working days.
“Considering that the same is being proposed in case of open offers, we may implement the same in buyback offers also. Therefore, it is proposed that tendering period may remain open for five working days,” as per the consultation paper issued on Friday.
Companies use buy back shares for reasons, such as to increase the value of remaining shares available by reducing the supply or to prevent other shareholders from taking a controlling stake. A share repurchase can demonstrate to investors that the business has sufficient cash set aside for emergencies and a low probability of economic troubles. PTI
