The Securities and Exchange Board of India (SEBI) issued a discussion paper on review of buyback of securities. The market regulator noted that there is a concern that much of the activities of the subsidiaries are not available in the public domain. It is possible that the subsidiaries of a listed company would be having large amount of debts.
The consolidated financial statement allows the investors to get a complete overview of the parent company. The subsidiaries could be either a listed company or an unlisted company. SEBI would have very limited role in case of unlisted subsidiaries. Therefore, it would not be prudent to exclude the debts of the subsidiaries and consider only the standalone financials while evaluating the size of the buyback or the debt to paid-up capital and free reserves ratio for the purpose of meeting the conditions for buybacks. Companies planning buyback of shares in future may have to consider consolidated group debt in their calculations, it stated further.
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