SEBI amends rules; introduces fixed price process for voluntary delisting

Markets regulator SEBI has notified rules allowing companies to delist shares through a fixed price mechanism as an alternative to the reverse book building process, a move aimed at facilitating ease of doing business for listed firms.

Under the Reverse Book Building (RBB) process, a firm planning to delist its shares from the stock exchange needs to initiate the process by making a public announcement. The rules mandated a minimum floor price for the delisting offer.

Further, shareholders of the company place offers to sell their securities back to the promoters or large shareholders under the process.

In its notification on Wednesday, SEBI introduced the fixed price process as an alternative to the RBB process for delisting companies whose shares are frequently traded.

The fixed price offered by an acquirer would be at least a 15 percent premium over the floor price.

Additionally, the regulator has provided modification of the counter-offer mechanism in case of delisting through the RBB process. Also, it has reduced the threshold for making a counter-offer from the existing 90 percent to 75 percent provided that at least 50 percent of public shareholding has been tendered.

"The counter offer price shall not be less than the higher of the volume weighted average price of the shares tendered/offered in the reverse book building process; and the indicative price, if any, offered by the acquirer," SEBI said.

The delisting would be considered successful only when the post-offer aggregate shareholding of the acquirer reaches 90 percent.

SEBI has introduced adjusted book value as an additional parameter for determining floor price for frequently and infrequently traded shares of the companies under the delisting framework, except for the Public Sector Undertakings (PSUs).

Also, it provided for modification of the reference date for computing floor price from the existing requirement of approval of the board to the date of initial public announcement for voluntary delisting as in the case of Takeover Regulations.

In addition, SEBI has introduced an alternate delisting framework for listed Investment Holding Companies (IHC) through a scheme of arrangement by way of selective capital reduction.

A listed IHC has at least 75 percent of its fair value (net of liabilities) comprising direct investments in equity shares of other listed companies.

Such IHC will be permitted to transfer the underlying equity shares held by it in other listed companies to its public shareholders proportionately.

Additionally, such investment holding companies will be permitted to make proportionate cash payments to their public shareholders against other assets, including investments in land, buildings and unlisted companies. If the entire public shareholding is extinguished, the IHC will be delisted.

Delisting of an IHC will be in compliance with requirements as specified by its financial sector regulator, if any, SEBI said.

To give this effect, the Securities and Exchange Board of India (SEBI) has amended the delisting of equity shares rules.