New guidelines make it tougher November 24, 2014 The new guidelines announced by the Securities and Exchange Board of India (Sebi) are set to make delisting tough, especially for companies with alarge shareholder base. The past few voluntary delisting offers — including DIC India, Ricoh India, Jolly Board, Indo Tech Transformers and Denso India — saw weak participation of public shareholders, between 1,000 and 2,000. This was between four and 10 per cent of the shareholders’ base of companies. Some of these offers were successful, though DIC’s was declared unsuccessful. Sebi’s revised guidelines of Wednesday say delisting would only be considered successful when the shareholding of the acquirer, together with the shares tendered by public shareholders, reach 90 per cent of the total share capital, and if at least 25 per cent of the number of public shareholders tender in the reverse book- building process. few delisting offers, retail participation was very low. Large shareholders, such as institutional and corporate, were the deciding factor. Therefore, minority shareholders were not getting a good deal,” said Girish Jain, executive dirtector, KJMC Capital. The revised guidelines, however, would allow a good deal for retail investors, said Jain. Though, prima facie, the proposal seems positive and would hasten the entire process, the 25 per cent rule could make it almost impossible for companies to achieve delisting, say some. Arun Kejriwal, founder, Kejriwal Research, an advisory firm, says: “ The revised guidelines are good in intent but seem to have some operational difficulties. The requirement of a minimum of 25 per cent of shareholders’ participation for the success of delisting seems difficult in mid- cap and large cap companies, due to the very large shareholder base. One hopes Sebi would be pro- active in considering all these operational issues.” He said many companies, including multinational ones with a large market capitalisation, typically tend to have a large shareholder base. Also the number of shareholders could actually hold only a small percentage of the total company stake. The revised guidelines bar promoters from delisting if they have sold shares within six months prior to the date of the Board meeting which approved the delisting proposal. The new regulations also allow the stock exchange mechanism to be used for all offers made under the Delisting, Buy Back and Takeover Regulations. - business-standard
Posted on: Mon, 24 Nov 2014 09:01:43 +0000
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