AS per IAS 32.AG25
An option of the issuer to redeem the shares for cash does not satisfy the definition of a financial liability because the issuer does not have a present obligation to transfer financial assets to the shareholders. In this case, redemption of the shares is solely at the discretion of the issuer. An obligation may arise, however, when the issuer of the shares exercises its option, usually by formally notifying the shareholders of an intention to redeem the shares.
Should I read the last sentence as when the issuer has the option to redeem the shares, and it does so, then, an obligation arises at that point in time, which would trigger a reclassification of the shares from equity to liability. However, at initial recognition, the shares are classified as equity?