SEBI Review on Delisting Norms
Context: SEBI is reviewing delisting regulations for listed companies to prevent share manipulation in companies opting for delisting. Delisting of Securities:
- Delisting means removing a listed company’s securities from a stock exchange.
- It can be voluntary (by the company) or compulsory (by the exchange as a penalty).
- For voluntary delisting, the company must buy back 90% of the issued shares.
- The current process for delisting uses reverse book-building for price discovery.
- In this process, offers are collected from shareholders at various prices, determining the buyback price after the offer period.
- Issue with Reverse Book-Building:
- Concerns have been raised about price manipulation during the delisting process.
- Some entities accumulate shares to anticipate higher delisting prices, leading to unfair practices.
- SEBI is reviewing delisting regulations to address the issues raised with the current process.
- The regulator is considering a fixed price method as an alternative option for delisting companies.
- In a Fixed price offer, the company specifies a fixed price at which it is willing to buy back shares from the public shareholders who wish to sell their shares.
- SEBI received recommendations from a committee headed by Keki Mistry and will seek stakeholder comments before finalizing changes.
- Benefits depend on the specific methodology SEBI adopts for arriving at the fixed price.
- A holistic review will ensure a smoother process for promoters and shareholders.