After a wait of almost two years, the government and the Securities and Exchange Board of India (Sebi) have firmed up their views on finalising the guidelines for delisting of companies from stock exchanges.
The government has also kick-started the process of corporatisation of clearing corporations. Despite differences of opinion, the reverse book-building process remains the choice for finalising the delisting price of shares.
In its draft proposal, Sebi has mooted a fixed price for delisting, which will be a 25 per cent premium over a fixed floor price. The fixed floor price is to be calculated by an accredited rating agency.
Sebi has mooted the alternative price discovery method as it considers that the reverse book-building process has failed to serve its purpose of fixing fair exit value for shareholders, giving disproportionate powers to public shareholders for cartelisation in price discovery.
Meanwhile, the issue of a threshold level of shareholding to decide on delisting still remains a bone of contention.
In its presentation to the finance ministry, Sebi has given two options. Promoters should either acquire at least half of the public shareholding in their respective companies or buy shares that 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 has 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.
Meanwhile, on the issue of clearing corporations, Sebi has made it clear to the government that each exchange should have its own clearing corporation as an independent profit centre. It is not in favour of a single clearing corporation for all exchanges to avoid monopoly of operations.
However, there will be separate corporate governance norms, group and single holding norms to be followed by clearing corporations. The existing clearing corporations, each owned by NSE, BSE and the Clearing Corporation of India, are not recognised under the demutualised norms of the Securities Contracts (Regulation) Act (SCRA).
The ministry of law has already submitted the legal framework both for clearing corporations and delisting guidelines to Sebi for comments. The government will soon convert Sebi's delisting guidelines into a regulation with a legal framework. This is to avoid amendments of rules on a case-to-case basis, which happens too often.
