Delisting involves removing a listed company's securities from a stock exchange, rendering them non-tradable on the exchange.
3. Current Delisting Process: Reverse Book-Building
Reverse book-building is the existing process used for price discovery during delisting. Shareholders submit offers to sell their shares at various prices, and the buyback price is determined after the offer closing period.
Manipulation Concerns SEBI chairperson Madhabi Puri Buch highlights the risk of manipulation by certain market participants, who, in anticipation of delisting, acquire shares and artificially inflate their prices to unsustainable levels.
4. SEBI's Proposed Changes and Review
Fixed Price Delisting SEBI is considering allowing companies to delist shares at a fixed price, instead of relying solely on the reverse book-building mechanism.
Seeking Stakeholder Feedback SEBI has received recommendations from a committee headed by Keki Mistry, the former vice-chairman and CEO of HDFC Ltd, on delisting norms. The regulator plans to seek comments from various stakeholders before implementing any changes.
Balancing Interests The review aims to strike a balance between the interests of promoters and shareholders in the delisting process. The current 90% threshold for successful delisting poses challenges that require attention.
5. Benefits and Challenges of Fixed Price Delisting
Enhanced Fairness The fixed price delisting mechanism seeks to address concerns related to fairness and prevent undue price inflation during delisting.
Methodology Details Crucial Experts caution that the effectiveness of the fixed price method depends on the specific formula used to arrive at the fixed price. The methodology must ensure robustness and avoid challenges in valuing shares and determining floor prices.
6. Conclusion
SEBI's review of delisting regulations demonstrates its commitment to curb manipulation and enhance fairness in the delisting process. Introducing a fixed price mechanism and seeking stakeholder feedback can lead to a more transparent and equitable delisting process, benefiting both shareholders and promoters in the Indian capital markets.
