Finance minister Nirmala Sitharaman in the 2019 Union Budget presented on July 5, announced a 20 percent buyback tax on listed equities, bringing them at par with unlisted ones. Following the Budget speech, KPR Mill withdrew the buyback of 37 lakh shares it announced in June.
JN Gupta, former executive director at the Securities and Exchange Board of India (Sebi) told CNBC-TV18 that KPR Mill will have to approach Sebi for an exemption. Once letter of offer is filed and public announcement made, buyback can’t be withdrawn. Also, the company can’t withdraw buyback once record date has passed.
“The buyback regulations are very clear that once a letter of offer is filed with Sebi and public announcement is made buyback cannot be withdrawn,” said Gupta.
“Therefore, in this particular case (KPR Mill) the letter has been filed, public announcement has been made, there is no way that under the existing regulation the company can withdraw the buyback.
"However, the regulation do provide a saving grace that if there is something in the public interest and in the interest of investor that the buyback has to be withdrawn then the board can give exemption,” he added.
“In this particular case, on its own, KPR Mill cannot withdraw the buyback offer. They will have to approach Sebi for permission to withdraw the buyback offer otherwise they will not be able to withdraw the buyback offer,” Gupta added.