Madhu Kela backs call for open market buybacks to boost investor confidence

markets

• Madhu Kela backs open-market buybacks to lift confidence
• He urges review of 25 percent tax on open market purchases
• Buybacks can help deploy surplus cash and support stock prices

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Investor Madhu Kela has backed calls to allow open market share buybacks, saying such a move is necessary to restore investor confidence amid rising market volatility.

His comments come after former Infosys CFO Mohandas Pai urged the Securities and Exchange Board of India to permit listed companies to resume open market buybacks, citing sustained foreign portfolio investor (FPI) selling and the impact on retail investors.

Speaking on CNBC-TV, Kela said the issue has gained urgency in the current market environment, even though it may have earlier been seen as less critical. He also acknowledged Pai’s role in amplifying the discussion.

Kela said retail investors have invested billions of dollars in Indian markets over the past three to four years and are now facing heightened anxiety amid volatility. “People are literally panicking because it is their hard-earned money,” he said, adding that there is a need to reinforce confidence as India’s long-term growth story remains intact despite current market conditions.

He noted that corporate balance sheets are in strong shape, with many companies holding surplus cash. “It is shareholders’ money, and they should be allowed to deploy it in a manner that benefits minority shareholders,” Kela said.

Kela argued that enabling open market buybacks would allow companies to utilise excess cash more productively, support stock prices and improve investor sentiment.

He pointed out that while open market purchases are technically allowed, an additional 25 percent tax acts as a deterrent and should be reviewed. He also said the tender offer route has become restrictive, requiring companies to commit fixed amounts within defined timelines despite uncertain cash flows.

“If companies are given flexibility with appropriate safeguards, it will boost investor confidence and allow deployment of surplus cash in a productive manner,” Kela said.