Sebi Allows Fixed Price Delisting for Companies

New Delhi, Jun 27 (PTI) Markets regulator Sebi on Thursday decided to allow companies to delist through a fixed price mechanism instead of the existing reverse book-building process in a bid to facilitate ease of doing business for listed firms.

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 a statement, Sebi said it has decided to introduce "fixed price process as an alternative to Reverse Book Building process (RBB) for delisting of companies whose shares are frequently traded".

The fixed price offered by an acquirer would be at least 15 per cent premium over the floor price.

In addition, Sebi has decided to introduce an alternate delisting framework for listed Investment Holding Companies (IHC) through a scheme of arrangement by way of selective capital reduction.

A listed IHC has at least 75 per cent of their fair value (net of liabilities) comprising direct investments in equity shares of other listed companies.

Such IHC will be permitted to transfer the underlying equity shares held by it in other listed companies to its public shareholders proportionately.

Additionally, such investment holding companies will be permitted to make proportionate cash payments to its public shareholders against other assets including investments in land, building and unlisted companies. If the entire public shareholding is extinguished, the IHC will be delisted.

"Delisting of an IHC shall be in compliance with requirements as specifiedby its financial sector regulator, if any," Sebi said.

Also, the regulator has provided modification of the counter-offer mechanism in case of delisting through RBB process. Sebi has approved a reduction in the threshold for making a counter-offer from existing 90 per cent to 75 per cent provided that at least 50 per cent of public shareholding has been tendered.

"The counter-offer price shall not be less than the higher of the volume weighted average price (VWAP) of the shares tendered/offered under the RBB process, and indicative price, if any, offered by the acquirer," Sebi said.

The delisting would be successful only when the post-offer aggregate shareholding of the acquirer reaches 90 per cent. Sebi has also decided to introduce adjusted book value as an additional parameter for determining floor price for frequently and infrequently traded shares of the companies under the delisting framework, except for the Public Sector Undertakings (PSUs).

Also, it provided for modification of the reference date for computing floor price from existing requirement of approval of the board to the date of initial public announcement for voluntary delisting as in the case of Takeover Regulations.