{"id":24993,"date":"2019-09-26T09:27:32","date_gmt":"2019-09-26T03:57:32","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=24993"},"modified":"2022-09-06T15:19:50","modified_gmt":"2022-09-06T09:49:50","slug":"sebi-is-likely-to-ease-share-buyback-norms-for-nbfcs-and-hfcs","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/sebi-is-likely-to-ease-share-buyback-norms-for-nbfcs-and-hfcs\/","title":{"rendered":"SEBI is Likely to Ease Share Buyback Norms: For NBFCs and HFCs"},"content":{"rendered":"<p class=\"has-drop-cap\">The proposal to ease share buyback norms for <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;NBFC&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Non-Banking Financial Companies (NBFC) operate similarly to banks but do not possess the legal status of a bank. Registered under the Companies Act 2013 and governed by the RBI Act&amp;#039;s section(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/nbfc\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>NBFC<\/a> is expected to be presented at the regulator&rsquo;s board meet. The regulator of Capital <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a> i.e. SEBI is likely to ease its norms for buy-back of shares by Listed Companies.<\/p>\n\n\n\n<div class=\"shadow4\"><strong>Note-<\/strong> The norms are especially for those having subsidiaries in Housing Finance and Non-Banking Financial Companies.<\/div><br>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Reason Behind the Proposal<\/strong><\/h2>\n\n\n\n<p>The main reason behind the proposal is the liquidity crisis hitting the Non-Banking Financial Companies, <strong><a href=\"https:\/\/enterslice.com\/housing-finance-company-registration\">Housing Finance Companies<\/a><\/strong>, SEBI might ease the share buy-back norms for these.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Points of the\nProposal<\/strong><strong><\/strong><\/h2>\n\n\n\n<p><strong>Once the proposal approves, the below-mentioned points are required to be implemented-<\/strong><\/p>\n\n\n\n<ol><li>The Proposed norms will follow the government&rsquo;s scheme to provide a one-time partial credit guarantee to&nbsp;<strong>public sector banks (PSB)<\/strong> for the purchase of pooled assets of financially sound NBFCs.<\/li><li>For <a href=\"https:\/\/enterslice.com\/nbfc-registration\"><strong>NBFCs<\/strong><\/a> and HFCs- The option is to buy-back their assets after a specified period of 12 months as a repurchase transaction.<\/li><\/ol>\n\n\n\n<p><strong>Note:\nIn case of listed companies &ndash; <\/strong>The share buy-back procedure\nis regulated under <\/p>\n\n\n\n<p>I. Securities and Exchange Board of India\n(Buy-Back of Securities) Regulations, 2018.<\/p>\n\n\n\n<p>II. <strong>Companies Act, 2013<sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup><\/strong>.<\/p>\n\n\n\n<ul><li>The company including (NBFCs and HFCs) wants to buy-back more than 10% of the aggregate of the paid-up capital and free reserve, but up to 25% of the paid-up capital and free reserve shareholders&rsquo; approval through a special resolution in the general meeting is required.<\/li><li>As per the Companies Act, the debt-equity ratio shall be less than or equal to 2:1. After buy-back, the debt should not be more than twice the equity.<\/li><\/ul>\n\n\n\n<p>However, the\ndebt-equity ratio for the government companies carrying Non-banking financial\nand housing finance activities is 6:1.<\/p>\n\n\n\n<p><strong>Exception&ndash;<\/strong>There are Companies for which a higher\nratio has been notified under the Companies Act, based on both standalone and\nconsolidated <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Basis&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In finance, the &amp;quot;basis&amp;quot; is a term with several applications, including representing the difference between the spot price and the future contract price of an asset, which is vital in investment(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/basis\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>basis<\/a>.<\/p>\n\n\n\n<p>Buybacks would\nstill be allowed if the debt to equity ratio does not exceed 2:1, in case of\nstandalone basis, but exceeds this threshold on a consolidated basis, i.e. if\nthe consolidated ratio is up to 2:1 after excluding the subsidiaries that are\nNBFCs and housing finance companies regulated by RBI or National Housing Bank.<\/p>\n\n\n\n<p>However, in any\ncase, the standalone debt to equity ratio of all such excluded subsidiaries\nshould not exceed 5:1.<\/p>\n\n\n\n<div class=\"shadow4\"><strong>Note &ndash;<\/strong> As per SEBI&rsquo;s Primary Market Advisory Committee suggestion, for computing the debt-to-equity ratio on consolidated basis regulated subsidiaries with AAA rating should be excluded.<\/div>\n\n\n\n<p>However, the regulator felt it difficult to enforce the proposed rating requirement as it would be difficult to prescribe and enforce the same due to practical implementation challenges such as dynamic changes in ratings, tenure of ratings and difference in ratings of short-term and long-term instruments.<\/p>\n\n\n\n<p>As a result, SEBI has decided not to exclude the regulated subsidiaries with AAA ratings for computing the debt-equity ratio on a consolidated basis<\/p>\n\n\n\n<ul><li>More stringent regulations for liquid mutual funds.<\/li><li>SEBI&rsquo;s proposal also follows a notification by the Corporate Affairs Ministry permitting to launch buyback resulting in up to 6:1 debt to equity ratio post the share repurchase for the government companies carrying out NBFC&nbsp;and HFC activities.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>Taking into consideration the loopholes of NBFCs and HFCs, SEBI has proposed to bring the stringent regulations for liquid mutual funds and to ease share buyback norms for NBFC.<\/p>\n\n\n\n<div class=\"read\"><p><b>Read More:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/different-types-of-nbfc\/\" target=\"_blank\" rel=\"noopener noreferrer\">What are the different types of NBFC and how they differ from each other?<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The proposal to ease share buyback norms for NBFC is expected to be presented at the regulator&rsquo;s board meet. The regulator of Capital market i.e. SEBI is likely to ease its norms for buy-back of shares by Listed Companies. Note- The norms are especially for those having subsidiaries in Housing Finance and Non-Banking Financial Companies. [&hellip;]<\/p>\n","protected":false},"author":25,"featured_media":24999,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3199],"tags":[2766,2767],"acf":{"service_id":"57"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>SEBI is Possible to Ease Share Buyback Norms For NBFCs and HFCs<\/title>\n<meta name=\"description\" content=\"The proposal to ease share buyback norms for NBFC is expected to be presented at the regulator\u2019s board meet. 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Read full story.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/sebi-is-likely-to-ease-share-buyback-norms-for-nbfcs-and-hfcs\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-09-26T03:57:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-09-06T09:49:50+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/SEBI-is-Likely-to-Ease-Share-Buyback-Norms.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/81216.jpg","authorDescription":"Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.","postViews":441,"readingTime":2,"nextPost":{"id":25033,"slug":"section-194-h-of-the-income-tax-act-1961"},"prevPost":{"id":25000,"slug":"loan-exposure-of-nbfc-increased-a-complete-analysis"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/SEBI-is-Likely-to-Ease-Share-Buyback-Norms.jpg","postTerms":"NBFC Compliance","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/24993"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=24993"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/24993\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/24999"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=24993"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=24993"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=24993"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}