New Delhi, Aug 14 (PTI) Capital markets regulator Sebi on Monday proposed allowing companies to delist through a fixed price mechanism instead of the existing reverse book-building process. Currently, the delisting process of a company from stock exchanges involves a reverse book-building process, whereby shareholders of the company place offers to sell their securities back to the promoters or large shareholders. In its consultation paper, the regulator has proposed alternatives to the reverse book-building process — fixed price delisting — delisting of investment holding companies, counter-offer framework, determination of floor price, and reference date for determination of the floor price.
The Securities and Exchange Board of India (Sebi) has sought comments from the public till September 4 on the proposals. Suggesting an alternative to the reverse book-building mechanism, Sebi has recommended providing the acquirer with the option of providing an exit opportunity to all public shareholders at a fixed price under certain scenarios. It has been proposed that such a delisting mechanism would be permitted only for those companies whose shares are frequently traded. Further, such a delisting offer would be subject to certain conditions — the fixed price offered by the acquirer should not be lower than the floor price and the delisting offer should be successful if the post-offer shareholding of the acquirer along with the shares tendered by the public shareholders, at the price offered by the acquirer, reaches 90 per cent of the total issued shares of the company. “The fixed price route will give acquirers and the shareholders certainty concerning the pricing of the delisting offer. This would help shareholders decide upfront whether to participate in the delisting process or not at the given price, ” Sebi said. This could also benefit an acquirer in arranging funds for such delisting offers as the price at which the exit offer will be made is known well in advance.
By providing a fixed price for delisting, the speculation that emerges following the announcement of delisting may be minimised, Sebi said. It has been proposed that the reference date should be the date of the initial public announcement or the date on which the prior intimation is required to be given to the stock exchanges, as applicable. Currently, the reference date to calculate the floor price is the date on which the stock exchanges are required to be notified of the board meeting in which the delisting proposal was considered and approved.
With regard to counter offer framework, Sebi has proposed that if the discovered price is not accepted by the acquirer or if the cumulative post-offer shareholding of the acquirer fails to reach 90 per cent, the acquirer will have the option to make a counter-offer if the bids received are higher of the difference between the acquirer’s shareholding and 75 per cent of the total issued shares of the firm; and 50 per cent of the public shareholding.
The current rule permits an acquirer to make a counter-offer only if, on the completion of the reverse book-building process, the aggregate post-offer shareholding of the acquirer along with the shares tendered by the public shareholders reaches 90 per cent of the total issued shares of the company. However, in case the aggregate post-offer shareholding of the acquirer along with the shares tendered by the public shareholders does not reach 90 per cent of the total issued shares of the company, the current provisions do not permit the acquirer to make a counter-offer. Also, the regulator has proposed an alternate delisting framework, whereby the shares of the underlying listed companies held by the Investment Holding Companies (IHC) are transferred to the IHC’s public shareholders and the holding of the public shareholders in the IHC is extinguished following a court-approved scheme of arrangement. PTI SP
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