The Securities and Exchange Board of India has approved changes to the process of voluntary delisting of shares by companies, allowing a fixed price process as an alternative to the existing reverse book building model. The fixed price offered by an acquirer shall be with at least a 15% premium over the floor price, as determined by delisting regulations.
In reverse book building, shareholders offer a price at which they are willing to sell their shares to the promoters or large shareholders through a price discovery model. The buyback price is determined after the offer closing price.
The changes are intended to rein-in the manipulation of shares of a company that has opted for delisting from the stock exchanges.
SEBI also modified the counter-offer mechanism in case of delisting through the reverse book building process.
The board has reduced the threshold for making counter-offer from existing 90% to 75%, provided that at least 50% of public shareholding has been tendered. The counter price shall not be less than the higher volume weighted average price of the shares tendered under the RBB process and indicative price if offered by the acquirer.
Delisting Holding Companies
The markets regulator also introduced an alternative delisting framework for listed investment holding companies via selective capital reduction. Listed holding companies that have at least 75% of their fair value comprising direct investments in other listed firms will be permitted to transfer the shares to public shareholders proportionately.
They will also be permitted to make proportionate cash payments to public shareholders against other assets, including investments in land, building, unlisted companies, etc.
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