The Securities and Exchange Board of India (SEBI) has introduced a raft of measures to improve the ease of doing business, protect the interests of investors and provide flexibility in the voluntary delisting framework.
The fixed price process has been introduced as an alternative to the reverse book building (RBB) process for delisting companies whose shares are frequently traded. An acquirer’s fixed-price offer must have a minimum 15% premium over the floor price determined under the Delisting Regulations.
An alternate delisting framework is now possible for listed investment holding companies (IHC) through a scheme of arrangement by selective capital reduction.
This means an IHC that has 75% of their fair value (net of liabilities) that includes direct investment in equity shares of other listed companies can:
- Transfer the underlying equity shares it holds in other listed companies to its public shareholders proportionately; and
- Make proportionate cash payments to its public shareholders against other assets including investments in land, building, unlisted companies etc.
The IHC shall be delisted once its entire public shareholdings are extinguished, in compliance with requirements specified by its financial sector regulator (if any).
The SEBI has also modified the counter-offer mechanism for delisting through the RBB process. The threshold for making a counter-offer has been reduced from 90% to 75% provided that at least 50% of the public shareholding has been tendered.
The counter-offer price cannot be less than the higher of the following:
- Volume weighted average price of shares tendered/offered under the RBB process;
- Indicative price (if any) offered by the acquirer; and
- Delisting is successful only when the post-offer aggregate shareholding of the acquirer reaches 90%.
An adjusted book value has been introduced as an additional parameter to determine floor price for frequently and infrequently traded shares of the companies under the delisting framework, except for public sector undertakings.
The SEBI changed the reference date for computing the floor price from requiring board approval to the date of the initial public announcement for voluntary delisting, as in cases under the Takeover Regulations.
