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Should SEBI allow open market buybacks now? Experts debateMarket experts are urging a rethink on buyback norms to support equities amid volatility. JN Gupta, Former ED at SEBI noted earlier concerns around taxation and transparency led to restrictions but said with changes in tax rules, reopening the route “can be explored.”By Hormaz Fatakia    |  Nimesh Shah  March 23, 2026, 3:20:22 PM IST (Updated)12 Min ReadThe sharp fall in equities has brought open market buybacks back into focus, with experts debating whether regulators should allow companies more flexibility at a time when liquidity has weakened and retail investors are feeling the pressure. With several firms sitting on surplus cash, some believe buybacks can act as a signal of confidence and help support sentiment during volatile phases.

To unpack this, CNBC-TV18 spoke with JN Gupta, former Executive Director at the Securities and Exchange Board of India, Madhu Kela, Founder of MK Ventures, and Mohandas Pai, Chairman of Aarin Capital, who had differing views on whether buybacks make sense right now.

Gupta said with most tax issues now sorted, SEBI could look at reopening open market buybacks, possibly with a shorter window and some tweaks. Kela, however, flagged the bigger concern — investor confidence. He pointed out that retail investors have been holding up the market despite foreign outflows, and that confidence needs to be protected at this stage.

These are edited excerpts of the interview.

Q: Mr. Pai, you had just put out a tweet earlier this morning where you had mentioned about opening up of open market buyback, that are currently being stalled by the regulators. Could explain the rationale behind such a proposal?

Pai: Indian corporate sector, specially listed companies are today handicapped by regulations. Earlier, before March 31st, 2025, listed companies were enabled to buyback from the open markets, or do a tender offer, they had the options, and the regulations were set in place, which was very good.

SEBI, in its wisdom, decided that buyback from the open market was unfair to small investors, primarily because they may not be able to participate. The finance ministry had a historical antipathy towards this because they felt this is another way of avoidance of tax.

Now in India, we have capital again tax on sale of equity in the markets, whether you buyback otherwise. And last year, they had a very bad policy where they said any buyback results in the money being received as dividend in the hands of investor shareholders and that's been amended now in the new law, where they say for non-controlling shareholders to hold less than 10% will be capital gains, and for others is dividend, which is ridiculous.

Now, buybacks from the open market are an important instrument for listed companies to manage that capital structure and to return surplus cash. Whenever there is a stock market crisis, or there is a steep fall, or there is an external event in most listed markets, companies decide to buyback the stock, because they feel the stocks have come to a value much below what they think is fair and to protect the shareholders, they will buyback.

They got the authority to buyback. They don't require shareholders approval in the United States, and they go buyback from the open markets. And the norms are very clear. They declare they are going to spend so much of money and to buyback, and we had a very good policy much earlier.

So now, when the market is falling, every now and then, FPI’s are selling, the global crisis, and small investors are hurt the most especially SIP, because in the last three, four years, we see huge amount of SIP come. It is time for the regulator to empower the listed companies and to make sure that they can buyback from the market where they have surplus cash.

The regulation that were there earlier are good, are in place. Maybe the one or two things that need to be said is, in case, if a buyback for the market, the controlling shareholders have to state whether they are going to participate, and if they are going to participate, they must declare they will not participate more than the pro rata. I hope they don't participate, because they must also show confidence in the company.

And the buyback should be for shareholders to sell, excluding the controlling shareholders. This will send signal to the market that the company believe in the future and I think it sends a very strong signal.

For the entire discussion, watch the accompanying video

Q: What were the key reasons behind SEBI’s decision to ban open market buybacks earlier? And given the current scenario, do you think it’s time for the regulator to revisit and possibly reopen this route, as suggested by Mr. Pai?

Gupta: Open market buyback was stopped or was not allowed for basically two reasons. Earlier the taxation system was that that the buyback were exempted from the tax and when small investor or US doing it to the market route, you never knew whether your share are going for sale through the buyback or in a normal course. So, if I sold the share today, I will know later whether it was bought back by the company or bought by bought by some other investors. So, there was uncertainty on the taxation for the seller, that was one. The second the window for buyback used to be too long, and it was purely at the option of the promoters or companies when they will buy, how much they will buy and there are a lot of problem.

Now with that new taxation system, the problem of tax has gone because it is now capital gain tax on whatever you get. So that's one problem that has gone, but other problem still remains. What Mr. Pai is saying that today, in a such a turmoil, the solution for a small investor could be to sell it. But then again, the issue is this, that it will always be bought back at the market price. And today, also you can sell at a market price, because no promoter, no company, is going to say that I will do unlimited buyback. There is a limitation. So that window will be open only for a day, or half a day, or whatever it maybe it will be like any other booking.

But yes, it is one option that can be explored, and there will be nothing wrong with the taxation system having changed, but I will pray that let the turmoil stop, rather than all this solution, because what happens if tomorrow the war stops and the prices go back to again, so the investor who would have sold into the buyback, they will say, Oh, I should not have, I should have held on.

Q: Your take on this whole issue of, should companies be allowed to do open market buyback? Should SEBI look into this, and what could be the key beneficiaries, as far as the minority shareholders are concerned?

Kela: Three context, a retail investors have put billions of dollars in the last three, four years, and at this point of time I get hundreds of call, people are literally panicking, because now it is their hard earned money, so there is a need from every angle for them to get confidence. Because in no way the India story dead, or India story derailed because of this volatility, or because of these events. We have passed through many such events. So there is a confidence which is required.

Second, there is a humongous amount of money which is being raised by corporates and promoters in the last three years and for the first time, corporate balance sheets are in really absolute healthy shape compared to I have seen them in many years. So, they have surplus cash. Thirdly, it is our own money. It is shareholders money, and they should be allowed to spend in a manner which really makes a lot of sense for minority shareholder at best.

The problem is one - open market purchases are allowed even today, but I have to pay additional 25% tax. That absolutely because with this clarification, which came in a financial bill, which was very important, which encouraged kind of buyback. I would humbly request the regulators to look into it, because this is an absolute need of the hour. The second thing is when you do a tender buyback, you have to commit to certain amount of money at a fixed time. In the time when the times are so volatile and companies cash flows are also unpredictable if they get a six month window to complete the buyback, you put whatever guardrails which you have to put to make sure that it is not misused.

But I would say this is an absolute need of the hour for the regulator to consider companies are allowed to do market purchases or buyback. It will boost investor confidence. It will also allow lot of companies which are sitting in cash to deploy that cash, that surplus cash in a very productive manner.

Q:  What can the SEBI do in this regard if they have to ease the buyback regulations here? Are their options open for them on the table?

Gupta: There were two routes. The one route was closed because of the problem that I highlighted. Now, with the taxation problem gone, the only one issue remains that the window. Because the window was too long and it was an earlier curtailed. So, in a short window, if it is to be reopened, it can always be done, because you have a framework ready that existing old regulation can be brought back with the required changes on emergency basis there is no issue on that. But then the bigger problem is whether this will solve the volatility issue or not, because the problem on hand is much, much bigger than what we are trying to solve.

Q: Beyond this measure, what more can be done to boost confidence among retail and SIP investors? What other challenges should regulators and the government address to better support minority shareholders?

Pai: Look markets are markets, and markets determine prices. Government should not intervene in the market. You can't have the old UTI, LIC stuff in the market and buying, which is very wrong, because they're all fiduciary agents. So let's forget about that. But I want to make a one more point in addition to what Madhu and JN said, and that is, look at it economically. Maybe the NSE 500 have got ₹5, ₹6, ₹10 lakh crores of cash sitting on the balance sheet. This cash earns them 6-7% because it is kept there as liquidity. Now they should be able to put it back into the market, buy the shares, reduce the share count, which will help them improve the EPS for the next year or the succeeding quarters and the money release will go into the market to stabilise stock prices, and will also increase the flow of money in the market.

The money that goes out will be used by investors to possibly buy more sophisticated investors to buy more and relieve the pressure. Today, the selling pressured by the FPI is being born by the mutual fund. The mutual funds are buying and acting as a counterweight, and we are lucky that we have SIP of 30,000 crores a month, which is a counterweight, but it cannot go on for long, because if SIP is break and the SIP investors will lost huge amount of money in the last six months, feel that they are not going to invest they're not going to put the money back. What happens to the market? We also have large IPOs lined up, and these IPOs lead to good capital formation and lead to jobs. The entire market is stuck because of many things, and buybacks are one of the things that can be done. And I think as far the government is concerned, to give confidence, I think the government is doing everything. For example, the biggest confidence that government is doing is not increasing fuel prices for the common man.

Q: From a broader market perspective, anything else that you expect as a as a veteran that government and exchanges should look into just to ease the bit of confidence, or just increase the confidence for retail investors?

Kela: Whatever the government can do today, it is very important that the small investors for whom equity has become a real asset class, he should not lose confidence at this point of time. So whether it is any bold economic reform which has been pending, this should be used as a real opportunity to unleash all of all of this. Let's not forget, retail investor has been a backbone for this country and for the economy in last four years, while foreigners have been relentlessly selling. It is the retail investors which have kind of literally saved this market in the last four or five years. It is collective effort of all of us, whatever little which we can do whatever little which you can do as a media house, and lot more with the government can do to boost up confidence at this point of time, so that this retail investor don't lose the confidence and buyback is only one small measure in that direction. I am sure lot many more things which are there in the pipeline, which can be done.Continue ReadingFirst Published: Mar 23, 2026 3:19 PM ISTTagsbuyback of sharesSEBItaxation