India’s market regulator proposes alternate way to delist shares

By Jayshree P Upadhyay

(Reuters) – India’s market regulator said on Monday companies could offer their shareholders fixed prices for shares as an alternate mechanism to delist from stock exchanges.

The Securities and Exchange Board of India (SEBI) floated this idea in a consultation paper released on its website. Such a paper is the first step towards a change in policy.

Currently delisting is carried out via reverse book-building, in which shareholders place offers for the price at which they would sell securities back to large shareholders, who can influence company policy.

SEBI said the fixed price for delisting cannot be less than the floor price, which should be set keeping in mind the fair market value of a company’s assets.

The floor price will be the minimum price at which investors can place bids or offer their shares.

The regulator said the reverse book-building can also continue.

If the price arrived through the process was not acceptable to public shareholders, controlling shareholders can make a counter if the offers received are more than 50% of the public shareholding.

The counter-offer price could be based on the volume weighted average of the bids received through the reverse book building process, SEBI said.

“Once such counter-offer is made, public shareholders will be given an opportunity to tender their shares,” it said. The bidding will be open for five days.

SEBI has sought public comments by Sept.4 before it finalises the rules.

(Reporting by Jayshree P Upadhyay; Editing by Janane Venkatraman and Arun Koyyur)