The Sebi move to phase out market buybacks will result in a lull in private equity deals, while putting promoters back in a quandary. It is common knowledge that a number of private equity players engage in assured return arrangements with promoters, wherein they agree on an exit price for their investment. Earlier, these exits were funded directly by the promoters who would do synchronised sale through the stock market window to give exit to investors. But in recent times, with the tax efficiency of buyback, that became the preferred route. Sometimes, buybacks were a costless way to prop up share prices and, at other times, they were to give selective exit to investors. The Sebi move puts promoters back in a quandary, for private equity would not relent on their pound of flesh, a promoter fretted.
