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.
Reverse Book-Building Process:
  • 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’s Review:
  • 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.
Benefit of Fixed Price Method:
  • 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.
News Source: The Indian Express

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