Relaxation in buyback norms delayed further

Rashmi Das

New Delhi, Oct 8: The corporate sector will have to wait for some more time for relaxation in share buyback norms as differences continue to persist between the finance ministry and the department of company affairs (DCA).

Sources said the proposed amendments in the buyback norms will not be put up before the Cabinet at its meeting on Tuesday even as law, justice and company affairs minister Arun Jaitley met finance minister Yashwant Sinha on Monday to discuss the matter.

According to senior DCA officials, Mr Jaitley and Mr Sinha also met Prime Minister Atal Behari Vajpayee to resolve the differences between the two ministries.

The main issue of contention relates to amending the two-year lock-in period for issuing fresh securities in respect of companies which have conducted a buyback operation.

As per Section 77A of the Companies Act, firms buying back shares cannot issue fresh securities. According to senior DCA officials, the department is still to receive convincing reasons for relaxing buyback provisions.

“There seems to be no explanation given between the relaxation of the buyback provisions and the revival of capital market,” a senior DCA official pointed out.

There had been widespread speculation that the lock-in period for the buyback provisions would be reduced to six months from two years and would be taken up for consideration by the Cabinet in its meeting on Tuesday.

Sources said that the department is in the still in the process of collecting opinions from industry and professional bodies. DCA officials still maintain that the buyback norms should not be diluted without fully understanding the impact and it should be in conformity with the listing norms of the Securities and Exchange Board of India (Sebi).

The main movers for the amendment have been the finance ministry and Sebi, who have taken the stand that relaxing the buyback provisions are necessary to bring back buoyancy in the market.