Sebi Proposes Faster, Simpler Delisting

The Securities and Exchange Board of India (Sebi) has proposed a review of delisting rules making them simpler, faster and less expensive following concerns from market intermediaries that current rules make the process of buying out minority shareholders as particularly cumbersome.

The regulator’s discussion paper on delisting rules has recommended doing away with the requirement for shareholder approval and an approval from stock exchanges.

“If there is no requirement of prior approval of the shareholders by special resolution and in-principle approval from stock exchange, it would considerably reduce the timeline to complete delisting process,” it said. Currently, the delisting process requires approximately 137 days to be completed. If the Sebi proposal is implemented, this period can be brought down to 64 days, it said. On pricing, the Sebi paper said companies may be allowed to have an option to make a delisting offer at a fixed price which would be either at a fixed premium to the floor price or a fair price as determined by merchant bankers to the delisting offers.

It said retail investors may be allowed to bid at the cut-off price similar to an IPO process, ensuring a significant portion of the retail holding gets tendered and retail investors have an exit.

The cut-off price may be determined via the reverse book building or any other suitable formula. This may provide an option to those retail shareholders who find it difficult to comprehend the reverse book-building process, it said. Delistings in India are currently done through this process, meaning companies set a floor price, but investors can determine at which price they will tender their shares to the company.

Indian Express, New Delhi, 10-05-2014