The Securities and Exchange Board of India (SEBI) has introduced amendments to the SEBI (Buy-Back of Securities) Regulations, 2018, via the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2024. These changes, effective from May 17, 2024, focus on excluding the impact of material price movements and confirmed events when determining the volume-weighted average market price...
The Securities and Exchange Board of India (SEBI) has introduced amendments to the SEBI (Buy-Back of Securities) Regulations, 2018, via the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2024. These changes, effective from May 17, 2024, focus on excluding the impact of material price movements and confirmed events when determining the volume-weighted average market price of a company's equity shares.
The amendments primarily alter Regulation 19 of the 2018 Buy-Back Regulations. Specifically, the newly inserted proviso allows the exclusion of price effects due to material movements and confirmation of events when calculating the volume-weighted average market price.
Additionally, Regulation 22B has been amended to incorporate similar exclusions when determining the lower end of the price range for buy-back offers.
The amendments are framed under the powers conferred by the SEBI Act, 1992, and the Companies Act, 2013. The changes align with the framework outlined in sub-regulation (11) of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). This framework dictates how material price movements and information confirmations should be handled to ensure fair and transparent market practices.
Buy-Back Processes
Buy-backs are mechanisms through which companies can purchase their own shares from the market, typically to reduce the number of shares in circulation. This can enhance shareholder value and improve financial ratios. The volume-weighted average market price (VWAP) is a critical metric in these transactions which ensure that buy-backs occur at a fair market value over a specified period rather than at transient high or low prices.
By excluding material price movements and confirmed events from VWAP calculations, SEBI aims to ensure that the prices considered for buy-back transactions are more reflective of the company's normal market conditions.
Under the new regulations, companies must now adjust their calculations for buy-back prices to exclude the effects of substantial price movements and confirmed events as per the specified framework.