The Securities and Exchange Board of India (SEBI) is exploring the option of allowing the delisting of firms from the bourses via a fixed price, and is likely to release a consultation paper on its norms by December, said Madhabi Puri Buch, the chief of the market regulatory body, on July 24.
The delisting process currently involves the reverse book-building procedure, where shareholders place offers for the price at which they are willing to sell securities back to the promoters or large shareholders who can influence company policy.
A delisting price is then computed based on these offers, but SEBI believes the process can be subject to manipulation.
The market regulator is now considering permitting a promoter to place a delisting offer at a fixed price for shareholders to consider.
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In reverse book building, said Buch, the concern is that "certain constituents in the market in anticipation of delisting acquire those shares in a concerted bid to cross 10 percent so that they are not able to cross the 90 percent, and then to cross the 90 percent, the price is jacked up...which is unsustainable".
"It is a question of looking at the bids and seeing what happens to the bids as it comes closer to the delisting," the SEBI chairperson said, adding that sometimes there is a "difference between an investor getting a fair value and extracting more value...we need to balance out the requirements of both".
"Before December, there might be a consultation paper out," Buch further noted.
Separately, SEBI is also planning to release a consultation paper on trading plans by August. "If you get into a trading plan, if you declare that six months in advance, then you are locked in for 12 months...even if the share price were to move dramatically," she said, adding that a condition may arise where even if the price falls, one will be forced to sell as they committed to the plan several months earlier.
"By the end of August, we should have a consultation paper soon," she said, adding that the discussion paper is aimed at "making this trading plan easier".
With Reuters inputs
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