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 with better chances to take their companies 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 (RBB) 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 the 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 the 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,” 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 RBB process or the fixed price process.

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

The RBB framework is considered to be very stringent as the delisting price arrived at 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 for 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 the 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 seventy-five per cent and not less than fifty per cent of the public shareholding has been tendered,” reads the regulation.

For the 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 that get delisted will not be permitted to seek relisting for a period of three years from the date of delisting.

First Published: Sep 26 2024 | 5:51 PM IST