 "SEBI")
Taking a step to overhaul and ease the voluntary delisting mechanism, the Securities and Exchange Board of India (Sebi) proposed changes to the voluntary delisting mechanism on Monday, including alternatives to the reverse book building (RBB) framework.
The capital markets regulator has suggested a fixed-price mechanism for voluntary delisting and a lower threshold for the counter-offer mechanism as alternatives to RBB.
The proposals have been formulated based on the recommendations of a Sebi-constituted sub-group chaired by Keki Mistry, the former chief executive officer of the erstwhile HDFC.
Currently, promoters planning to delist have to provide an opportunity for public shareholders to exit. This is achieved at a price discovered through RBB.
Under the RBB mechanism, promoters must acquire at least 90 per cent of the total shareholding for the delisting bid to succeed.
According to the recommendations of the expert committee, a fixed-price route will provide promoters and shareholders with certainty regarding the pricing of the delisting offer. However, even in the case of a fixed-price model, the promoter will need to bring the post-offer shareholding to 90 per cent. Additionally, the fixed price cannot be lower than the floor price determined by the delisting norms.
“This would help shareholders decide upfront whether to participate in the delisting process at the given price or not. This could also benefit an acquirer in arranging funds for such delisting offers, as the price at which the exit offer will be made is known well in advance,” noted the discussion paper floated by Sebi.
It adds that such a mechanism will minimise speculation after the announcement of delisting.
In July, Sebi Chairperson Madhabi Puri Buch indicated a fixed-price delisting, citing misuse by certain operators as the challenge in the RBB mechanism. Challenges in the current RBB mechanism were mentioned by promoters who represented to the markets regulator that the RBB framework was too stringent and prone to misuse by certain operators.
Reviewing the counter-offer framework, the expert group has recommended that if the discovered price is not accepted by the promoters or if they fail to reach 90 per cent shareholding, the promoters will have the option to make a counter-offer.
A counter-offer can be made if the received bids reach a certain threshold. This threshold would be the higher of two figures: 50 per cent of the existing public shareholding or the difference between the acquirer’s shareholding and 75 per cent of the total issued company shares.
Sebi also proposed a delisting framework for investment holding companies (IHCs), as the current mechanism does not address it separately.
IHCs hold investments in listed and unlisted companies and may also have other holdings in real estate assets.
Under the proposed framework for delisting IHCs, shares of the underlying listed companies held by the IHC will be transferred to the IHC’s public shareholders, and the holding of the public shareholders in the IHC will be extinguished pursuant to a court-approved scheme of arrangement.
The committee has also recommended certain checks and balances to ensure the protection of the interests of public shareholders.
The markets watchdog has requested comments on the proposals by September 4.
