SEBI Brings Back Open-Market Buybacks From August 1 — These Cash-Rich Stocks Win Most

SEBI Brings Back Open-Market Buybacks From August 1 — These Cash-Rich Stocks Win Most

On June 19, SEBI's board approved the reintroduction of open-market share buybacks through stock exchanges, effective August 1, 2026. This reverses the ban imposed in April 2025, which had forced companies to use the costlier tender offer route exclusively. The trigger for the U-turn: the Union Budget aligned buyback taxation with capital gains, removing the tax-distortion argument that justified the original ban.

For retail investors, this matters because open-market buybacks are fundamentally different from tender offers. Under a tender, companies buy shares at a fixed premium — typically benefiting large institutional holders who tender in bulk. Open-market buybacks happen through regular stock exchange trading over weeks, providing gradual price support that benefits all shareholders equally.

SEBI has added guardrails this time: companies must complete buybacks within 66 working days, deploy at least 40% of earmarked funds in the first half of the buyback window, and promoters are barred from participating (with their shares locked during the process). These rules address the old concerns about price manipulation while preserving the flexibility companies wanted.

Who benefits most? Follow the cash.

Infosys (INFY) is the poster child. The company has a formal capital allocation policy of returning approximately 85% of free cash flow to shareholders through dividends and buybacks. Per their FY26 annual report, the Board approved an ₹18,000 crore buyback in September 2025 — their largest ever. Their previous ₹9,300 crore open-market buyback in 2022-23 was completed at an average price of approximately ₹1,539 per share, well below the maximum buyback price of ₹1,850. That efficiency — buying below the ceiling — is exactly what open-market buybacks enable and tender offers don't. With the open-market route returning, Infosys can resume its preferred playbook. Wipro (WIPRO) has been vocal about preferring buybacks over dividends. In their Q2 FY25 earnings call, CFO Aparna Iyer noted that "there are benefits of buyback compared to the dividend even after the budget" and confirmed the company was "drawing up a revised capital allocation policy." Wipro distributed $1.3 billion in dividends in FY26 alone, with a total payout ratio of about 88% over its three-year block — well above its 70% minimum threshold. A buyback expected to complete in Q1 FY27 was already in the pipeline. The open-market route gives Wipro a more capital-efficient tool to execute its next round of shareholder returns. TCS quietly generates enormous free cash flow — $1.45 billion in the most recent period, with $7.28 billion in invested funds. Per their Q2 FY25 earnings call, the company's "capital allocation policy remains consistent on returning surplus free cash flow back to shareholders." TCS recommended a dividend of ₹76 per share for FY25, including a special dividend of ₹66. Their three interim dividends of ₹11 each in FY26 totalled ₹11,940 crore. With this kind of cash generation, the open-market buyback route gives TCS another lever — one they've historically used — to return capital more tax-efficiently. Bajaj Auto (BAJAJ-AUTO) announced an ₹5,633 crore buyback under the tender route at ₹12,000 per share, alongside a final dividend of ₹150 per share (₹4,192 crore). The tender route forced Bajaj to set a fixed premium price. With open-market buybacks returning, future buybacks can be executed at market prices over time — potentially stretching the same capital further and buying back more shares for the same outlay. Symphony (SYMPHONY) is a smaller but instructive example. This asset-light consumer durables company has done multiple buybacks: ₹200 crore and ₹71.40 crore through tender offers in successive years. Their total shareholder payout of ₹284 crore represented 244% of consolidated net profit in FY23. Symphony's "Shareholders' Reward Policy" explicitly balances payout with cash retention. For mid-cap companies like Symphony, the open-market route is significantly cheaper to execute — no letter of offer, no escrow mechanics, no fixed premium. Zydus Lifesciences (ZYDUSLIFE) completed a ₹725 crore buyback using general reserves and retained earnings. As a pharma company where the US represents 46% of consolidated revenues per their annual report, Zydus generates strong dollar-denominated cash flows. The open-market route would let them time buybacks around earnings cycles rather than committing to a single tender price.

The bigger picture

The pattern is clear: companies with asset-light business models, high free cash flow conversion, and existing capital return policies stand to benefit most. IT services (Infosys, TCS, Wipro) are the obvious winners — they've historically been the heaviest users of the open-market route. But the real opportunity is in mid-caps like Symphony and specialty pharma names like Zydus, where the fixed costs of a tender offer had made smaller buybacks uneconomical.

What retail investors should do

Watch for buyback announcements after August 1, particularly from companies that have historically used this route. Open-market buybacks provide a floor under the stock price during the buyback window, which can be valuable in volatile markets. The 40% deployment rule in the first half means price support will be front-loaded. However, don't chase stocks purely on buyback speculation — the underlying cash generation and capital allocation discipline matter more than the mechanism. Companies with formal return policies (like Infosys's 85% FCF commitment) are the ones most likely to act quickly once the new rules take effect.

Data sourced from company filings on NSE via Xaro.