Sebi objective on new delisting norms unclear: Anil Jindal

If the meaning is suppose at the end of the delisting process out of 10,000 Sebi says that at least 7000. If 7500 shareholders are there, 7500 shareholders have not participated in the delisting process and delisting is considered to be successful then it is fair. Then Sebi can say that they have done this to increase the participation of public shareholders.

Another meaning to this point is does Sebi want those shareholders who were shareholders on the date of board meeting to participate and they should not sell or buy shares after the board meeting and before the delisting process?

Latha: I don’t think they meant that. I think Sebi's meaning quite clearly is 25 percent of those who are registered in the books of the company as shareholders. I don't think there is ambiguity there.

A: In the discussion paper it was said there are few participants, why did they come out with a discussion paper at all? What is the objective which they are trying to achieve by this? It is not very clear to me. Are they doing it for the shareholders, are they doing it for promoters because they have taken a number of measures?

As you know the time has been reduced, they have allowed the use of stock exchange which means you are entitled for the long-term capital gains, short-term capital gains also. However, all those measures would be rendered meaningless. The ultimate objective is not to allow the companies to delist because there are a number of companies that are going for delisting and Sebi is concerned about it.

If the ultimate objective is not to allow the companies to delist that is probably one of the case also. In the last few delisting cases, for example Indo Tech Transformers, they have some 14,000 shareholders. They contacted every shareholder who is having more than 50 shares. They provided free courier services all over India. Ultimately the share tenders were around 1200 that is around 10 percent; I think that is around maximum if the shares are tendered with so much of effort.

In Ricoh, around 1000 bids came out 13,000-14,000 shareholders. So, saying that 25 percent shareholders participate - what I am trying to say is if the ultimate objective is to get more public then one of the interpretations could be suppose there are 10,000 shareholders on the date of the board meeting and at the end of the delisting 7500 shareholders remain. Can it be presumed that 2500 have participated because the number of shareholders at the start of the board meeting and when the process starts would be different because there will be consolidation, there will be few people who buy shares, there will be few people who sell shares? So, that will increase.

So, suppose actual bid is say 1500 but shares for 2500 shareholders who were actually shareholders on the date of board meeting have participated.

Latha: So your point is that going by recent historical records practically never has there been 25 percent participation. The maximum with all the effort of courier service provided was only 10 percent?

A: Yes, that is correct. So, practically this will kill the product and I don’t think any company would be delisted with these guidelines in play.

Another clarification which the Sebi needs to give because there are already six-seven companies which have already had the board meeting, they have already announced their intention to delist in the old delisting regulation. So, will they be allowed to go in the old regulations or they will also have to comply with this.

Sonia: Which are these companies?

A: There are a few companies for example Essar Oil, Essar Ports and Essar Shipping. There is one Manjushree, Panasonic Appliances. There are few companies which have already shown their interest to delist.

Sonia: Are there any companies that you have tracked or that you have watched for which it will be easy for them to go through with the delisting?

A: In the discussion paper since this delisting regulations came into bay in 2003, there are 38 companies that announced delisting. In fact the data which Sebi gave itself was incorrect. There is only one company; in the discussion paper it said only two companies which rejected the offer price. The book was built but it was rejected by the acquirer. 36 or 37 according to me; the data was not correct. Either to the book was not built or the price was accepted which shows that promoters find commercial sense in delisting. They want to delist, they are willing to pay price.

So, many companies and not just MNCs, even Indian companies want to delist. It makes commercial sense for them. So, this thing that the price is high, I don’t think it is correct. Only one company I don’t want to name it but the whole market knows that they rejected first and then later on they again came out at lower price. So, it was kind of a fixed match.

Latha: It is the fixed match kind of instances that Sebi wants to avoid where big brokers warehouse shares and then get away with that 50 percent shareholding norms simply because they have accumulated shares over a period of time. That is exactly what Sebi wants to stop, isn’t it?

A: But that will not stop because this purpose is not being served as yet. In that case you can say it for open offer also that people don’t buy it and sell shares because ultimately when the open offer is announced those who participate are different. When the bonus is announced people are different and in fact suppose on the date of the board meeting, the share price is Rs 100, the price goes up to Rs 110. There are a few people who don’t want to take that risk and want to sell at Rs 100; they don’t want to take that risk.