The Hindu Business Line : Delisting tightened to benefit investors

IN an effort to stiffen the norms for delisting of securities with the objective of providing better cover for investors, the Securities and Exchange Board of India (SEBI) has issued fresh guidelines on Monday, directing the stock exchanges to monitor the "possibility of price manipulation" and keep a "special watch" on the securities that come up for delisting.

As per the guidelines, the exit price for delisting of securities shall be determined in accordance with the book building process (known as reverse book building) through an electronically-linked transparent facility.

The offer price shall have a floor price, which will be the average of 26 weeks traded price preceding the date of the public announcement. The final offer price shall be determined as the price at which maximum number of shares has been offered.

After the final price is determined based on the book-building process, the promoter or the acquirer will have to make a public announcement of the final price and communicate to the exchanges from which the delisting is sought to be made within two working days.

Further, the number of bidding centres shall not be less than 30, including all the stock exchange centres, which should have at least one electronically-linked computer terminal each. However, the promoter has the right not to accept the offer price determined by the book building process.

In which case, the promoter should not make an application to the exchange for delisting of the securities, as per the guidelines. Instead, he shall ensure that the public shareholding is brought up to the minimum limits specified under the listing conditions within six months.

The new guidelines have also tightened norms for compulsory delisting of companies by stock exchanges, which can delist companies that have been suspended for a minimum period of six months for non-compliance with the Listing Agreement. SEBI has come out with a set of norms for stock exchanges to delist companies, ranging from the percentage of equity capital (floating stock) in the hands of public investors, minimum trading level of shares of a company on the exchanges, financial/business aspects of the company to the track records of compliance with Listing Agreement requirements for the last three years and promoters' track record in regard to insider trading, manipulation of share prices and unfair market practices.

In such cases, the exchange shall give a show-cause notice to the company and provide 15 days' time for representation to be made by any person who may be aggrieved by the proposed delisting.

In regard to reinstatement of delisted securities, exchanges have been permitted to relist the securities but only after two years of delisting of the securities.

The guidelines are based on the recommendations of the committee headed by Mr Pratip Kar, SEBI Executive Director.

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Delisting tightened to benefit investors