Govt for status quo on delisting norms

Sebi had proposed wider investor participation for delisting.

The Securities and Exchange Board of India's proposal for a change in delisting norms has not found favour with the government which wants a status quo.

Sebi, in its presentation to the finance ministry, had given two options: promoters should acquire either at least half of the public shareholding in their respective companies, or buy shares which will take their shareholding to a little over 90 per cent, whichever ensures a larger number of shares . The existing rules do not specify a minimum level of public participation for delisting.

Sebi had further suggested that if half of the shareholders are not willing to participate in the buyback programme, the company should remain listed.

The government, however, is not in favour of this suggestion on the ground that delisting should not be withheld if the promoter has already acquired over 90 per cent of the shares. It will block the exit route for those investors who have sold their shares to the promoter and are not happy with the management.

There are two categories of companies listed on the bourses: 90:10 and 75:25 promoter holding. In the 90: 10 format, a company could get listed by floating 10 per cent of its holdings while in the 75 : 25 format, the promoter needs to divest 25 per cent of the holdings to the public.

Under the existing delisting norms, a company can get listed by taking its holding to a little over 90 per cent or 75 per cent as the case may be. This has led to discontentment among the retail investors as they felt that the norms do not represent a wider investor interest.

Delisting provides an exit option to retail investors. A company can delist if is listed for a minimum period of three years on any exchange.

Sebi had also given a deadline of May 2008 to the companies where the outstanding shares with the public are just on the verge of being 10 per cent or 25 per cent.