Market sentiment gathers momentum
By Our Markets Bureau | 17 Oct 2001
Mumbai: Efforts to boost the depressed market sentiment gained momentum on 16 October when the government announced radical changes in the share buyback norms. Companies will now be allowed to buy back up to 10 per cent of their equity by merely taking their boards approval. They dont have to seek the approval of the shareholders anymore.
Earlier, it was mandatory for the company to seek approval of the shareholders if it wanted to buy back up to 25 per cent of the paid up capital.
Further, companies will now be able to issue fresh equity shares after a period of six months of the buyback instead of the previous cutoff period of 12 months. Companies going in for a buyback will not be allowed to do so again for at least one year from the date of the first buyback. This is to prevent companies from buying back shares frequently.
Sebi had advised the government against bypassing the shareholders for the buyback of shares saying this would allow large shareholders to marginalise small shareholders. But the government had turned down Sebis advice.
Analysts are of the view that the new regulation will have a positive impact on the market sentiment.
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