Sebi floats consultation paper to review delisting norms; proposed fixed price for voluntary delisting

MUMBAI - The Securities and Exchange Board of India (Sebi) issued a consultation paper on Monday, seeking comments on reviewing the current delisting norms for stocks.

The Primary Market Advisory Committee (PMAC) has made certain recommendations, including alternatives for reverse book building process to discover the delisting price.

When companies decide to voluntarily delist shares from the exchanges, they provide an exit opportunity to public shareholders.

As per the current norms, the exit price is determined when the cumulative shareholding of the promoter, along with the shares tendered by public shareholders reaches 90% of the total issued shares under the reverse book building mechanism.

If the discovered price is acceptable to the promoter, then all the tendered shares must be accepted at that price.

If the discovered price is not acceptable to the promoter, a counter offer can be made to the public shareholders or the discovered price can be rejected.

Challenges
In cases where the aggregate post-offer shareholding of the promoter/acquirer does not reach the 90% threshold, the current delisting regulations do not allow them to make a counter offer to public shareholders.

The sub-committee set up to review the regulations believes that this may lead to a scenario where majority of the public shareholders have tendered their shares and are in favour of delisting, but the delisting offer fails since the required thresholds are not met.

In such cases, the acquirer does not have the option to make a counter-offer to public shareholders. Further, the acquirer will be required to wait for six months to make another delisting offer.

Considering the above mentioned constraints in the current framework, the committee proposed to lower the threshold required to make a counter-offer.

“A lower counter-offer threshold would give an acquirer the opportunity to make a counter-offer that could potentially be accepted based on bids received by public shareholders,” Sebi said in the consultation paper.