Sebi amends rules, introduces fixed price process for voluntary delisting

The Securities and Exchange Board of India (Sebi) has notified critical changes in the delisting regulations, providing promoters better chances to take their firms private through a fixed price framework.
 

The regulator has also introduced new norms to facilitate the delisting of investment holding companies (holdcos).
 

In addition to the reverse book building process, Sebi has introduced a fixed price process where promoters can offer to buy back all shares from the public at least 15 per cent premium to its “ fair price”.

“In case the acquirer has proposed delisting through a fixed price process; the acquirer shall provide a fixed delisting price which shall be at least 15 per cent more than the floor price calculated in terms of regulation 19A,” as per the notification dated September 25.

 

Further, the acquirer will be eligible for delisting through a fixed price process only if the shares of the company are frequently traded.

“This new regime gives existing promoters an option to delist their entities at a fixed price with a 15 per cent premium to the floor. This is in addition to the already available bidding route (RBB). Whether in a given scenario, one will use the new route or the old one, will have to be assessed based on what the key public shareholders will accept. In many cases, promoters will still opt for RBB, as a counter offer mechanism is available under that route alone,” said Gautam Gandotra, partner, Cyril Amarchand Mangaldas.

Sebi has specified metrics for the calculation of the floor price of the equity shares proposed to be delisted through the reverse book building (RBB) process or through the fixed price process.

The regulator noted that it should not be less than the highest paid for any acquisition during the 26 weeks preceding the reference date, volume weighted average price paid by an acquirer during 52 weeks preceding the reference date, or adjusted book value, among other criteria. 

The RBB framework is considered to be very stringent as the delisting price arrived using this process is often quite high, making the offer untenable.

Though the amendments have been made effective from September 25, any acquirer may make the delisting offer as per the previous norms till the next two months.

Further, Sebi has reduced the threshold under the counter offer mechanism to 75 per cent from 90 per cent of public shareholders. 

Under the RBB process, the delisting process is considered successful if the post-offer aggregate shareholding of the promoter or the acquirer reaches 90 per cent.

“In case of delisting through reverse book building process; a counter-offer may be made by the acquirer to the public shareholders, provided the post-offer shareholding of the acquirer, along with the shares tendered by public shareholders, is not less than 75 per cent and not less than 50 per cent of the public shareholding has been tendered,” reads the regulation.

For delisting of investment holding companies, Sebi specified that to be eligible, the holdco should have at least 75 per cent of its fair value comprising direct investments in equity shares of other listed companies.

This fair value will be determined through a joint report by two independent valuers.

The market regulator has pointed out that the shares of the holdcos which get delisted will not be permitted to seek relisting for a period of three years from the date of delisting.

... simplifies reporting system for participants, launches UDiFF
 

In a move to promote ease of doing business, the Securities and Exchange Board of India (Sebi) has introduced the Unified Distilled File Formats (UDiFF), a standardised reporting system for trading members, clearing members, and depository participants. Previously, these entities had to file over 
 

200 proprietary report formats daily with their respective market infrastructure institutions (MIIs). However, Sebi’s initiative has reduced this number to just 23 formats, conforming to international ISO standards.
 

The key benefit of this initiative is an estimated savings of Rs 200 crore over five years due to lower operational expenses, Sebi said in a  release. UDiFF will also help lower integration costs for new fintechs and make the MII-Member interface interoperable with no additional development costs. The UDiFF implementation was phased, with a parallel run of the existing system for nearly two quarters, ensuring a smooth transition for market participants, the regulator said.