On Wednesday, capital markets regulator Sebi imposed restrictions on bids, prices and volumes of companies conducting share buybacks through the stock exchange route.

Under the restrictions, Sebi said in a circular, a company could not buy more than 25% of its shares’ average daily trading volume (value) in the 10 trading days preceding the purchase.

Among them, the company will not bid before the market opens, the first 30 minutes and the last 30 minutes of the regular trading session, and the company’s buy order price should be within 1% of the final traded price.

Sebi requires companies and appointed brokers to ensure compliance with these regulations. The stock exchange will monitor their compliance and, in the event of non-compliance, impose appropriate fines or other enforcement actions as they deem fit.

Currently, companies have two options for share buyback: a stock exchange and a tender offer.

Regarding the margin requirement for deposits in an escrow account, Sebi said the account should consist of cash and/or non-cash. Appropriate deductions will be made for the portion of the escrow account that is not in cash.

Sebi said commercial bankers for buyback offers must ensure that sufficient discounted amounts are available in escrow accounts before completing all repurchase formalities.

In February, regulators amended securities buyback rules to streamline the buyback process, level the playing field for investors and facilitate ease of doing business.

Under the rules, the buyback of shares by companies through the stock exchange route will be phased out to address the drawbacks associated with the existing mechanism.

In addition, the companies must use 75% of the proceeds from repurchases through the stock exchange route, compared with the current minimum of 50%.

In addition, buybacks will be conducted through a separate window of the stock exchange until they can pass through the exchange.

Since shares are repurchased at prevailing market prices, accepting buyback shares is an occasional issue for most shareholders. It was not immediately clear whether the shares would be subject to buybacks or be sold on the open market. Therefore, shareholders cannot claim the benefits arising from the buyback.

The Securities and Exchange Board of India (Sebi) said the revised buyback rules would take effect on March 9.