SEBI has recently amended the existing buy back
regime (Buy Back of Securities Regulations, 1998) concerning the securities
market vide notification dated 8th August, 2013. Thus, the new buy
back regime has kicked in by the way of SEBI (Buy Back of Securities) Regulations,2013. Various changes have been introduced in the new regulations to ensure
that there is lower volatility in the capitals market. Further, the new
regulations has taken a substantial amount of flexibility and leeway, the
companies earlier enjoyed concerning the time lines attached to open market
purchase of the securities.
Now, before moving on to discuss the changes and
modifications introduced in the new buy back regime, a little understanding of
what exactly is ‘buy back of securities’ would be useful.
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Buy Back of securities basically means the purchase
of securities by a company from its existing shareholders. Thus a company
purchases backs its own share in order to reduce the number of shares in the
market. Buy back of shares is usually done by a company due to of following reasons-
i. Return
surplus cash to the shareholders
ii. Support share price during periods of
temporary weakness
iii. Increase
the underlying share value
iv. To
increase the value of shares still available (by reducing the supply)
v. To
eliminate any threats by shareholders who may be looking for controlling stake(hostile
takeover)
Now, we shall discuss the modifications and
amendments introduced by the new Buy Back of Securities, Regulations 2013.
