The Securities and Exchange Board of India (Sebi) has made crucial changes in the delisting regulations of companies, offering promoters with better chances to take their companies private through a fixed price framework. The regulatory body has implemented fresh guidelines to streamline the process of delisting investment holding firms. Alongside the reverse book building (RBB) method, Sebi has introduced a fixed-price process enabling promoters to repurchase all public shares at a minimum of 15% premium to the "fair price".
Sebi, in its notification on September 25, stated: “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.”
Sebi introduced the fixed price process as an alternative to the RBB process for delisting of companies whose shares are frequently traded.
The fixed price offered by an acquirer would be at least a 15 per cent 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 per cent to 75 per cent provided that at least 50 per cent 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.
Sebi has established specific metrics to be used in determining the floor price of the equity shares scheduled for delisting through the RBB process or fixed price process.
These metrics include ensuring that the floor price is not lower than the highest price paid for any acquisition in the 26 weeks leading up to the reference date, the volume-weighted average price paid by an acquirer in the 52 weeks preceding the reference date, or the adjusted book value, among other criteria.
The RBB framework is known for its strictness, with delisting prices often being deemed as excessively high, rendering the offer unfeasible. Despite amendments taking effect on September 25, acquirers have the option to proceed with delisting offers based on previous norms for the next two months.
Additionally, Sebi has decreased the threshold for the counter-offer mechanism to 75 per cent from 90 per cent of public shareholders. Within the RBB process, a delisting is deemed successful if the post-offer aggregate shareholding of the promoter or 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,” Sebi said.
Sebi has established criteria for the delisting of investment holding companies. Holdcos must have a minimum of 75% of their fair value in direct investments in equity shares of other listed companies to be eligible for delisting. This fair value will be assessed by two independent valuers through a joint report. Sebi has also indicated that delisted holdcos will not be allowed to seek relisting for a three-year period following the delisting date.
(With PTI inputs)