Sebi board set to have an action-packed meeting on March 25

SEBI headquarters.

The Securities and Exchange Board of India (Sebi) will be holding a board meeting on March 25. The market regulator’s board may have several items on the agenda for discussion, including a revamp in delisting regulations, de-classification of promoters, shareholding norms for Market Infrastructure Institutions (MII) and an innovation growth platform.

A source close to the development told Moneycontrol: “The Sebi board may discuss several issues on the primary and secondary market on March 25. In fact, the regulator’s plan for the primary and secondary market for the whole year may be discussed.”

Sebi may propose delisting regulations to address the gap in current regulations, which will increase transparency among public shareholders.

Indicative pricing for delisting

With regard to delisting regulations, Sebi may formalise indicative pricing. Promoter(s) / Acquirer(s) may be allowed to specify an indicative price that shall not be less than the floor price calculated in terms of Regulation 8 of Takeover Regulations. Under current, regulations, a company sets a floor price for delisting and some promoters indicate a willingness to purchase shares from public shareholders at that price. Promoters don't need to specify an indicative price under current regulations. 

Further, the source cited above said “Sebi may ask independent directors to give reasoned recommendations on the delisting proposal for the benefit of public shareholders”. Sebi may force companies to disclose the voting pattern of independent directors for the board resolution on delisting.

Reverse book building

The regulator has a plan to change the process of reverse book building. It wants unconfirmed bids on stock exchanges not to be disclosed, which (disclosure) is a practice now to influence how shareholders react to a proposal. 

Sebi plans to have the outcome of Reverse Book Building to be announced two hours after the closure of the tendering process, as against the live process now. 

The regulator may also reduce the time to make a public announcement on a counter offer or about accepting or rejecting the discovered price from five days to two days.

The regulator may impose a condition requiring promoters to accept a delisting price if the price discovered in Reverse book building is the same as the floor price.

Reclassification of Promoters

Sebi may increase the maximum shareholding threshold for reclassification of promoters from 10 percent to 15 percent. Promoters will thus not be allowed to have 15 percent or more in shareholding rights in a company.

An exemption from the reclassification requirement may be allowed following an open offer.

Innovators Growth Platform 

In a set of regulations meant for start-ups, Sebi may reduce the period to hold 25 percent of the pre-issue capital of an issuer company by eligible investors to one year from two years. The regulator may also discuss differential voting rights for promoters.

Sebi may also ease the way for delisting of the Innovators Growth Platform or startup companies. The regulator may also relax norms for startups to migrate to the main board of an exchange.

Analyst Call Recording to be made public in 24 hours

The market regulator may address the asymmetry in information that arises after analyst meetings and conference calls conducted by listed companies.

Sebi may tell companies to make audio/video recordings of such meetings available on their website and on stock exchanges within 24 hours of the occurrence of the event.

Shareholding of MIIs

Sebi may discuss a new framework for ownership of Market Infrastructure Institutions to facilitate the setting up of stock exchanges and depositories.

As per a proposal, promoters who are resident individuals or domestic institutions (resident owned and controlled) can hold up to 100 percent in an MII. At present, the limit is 5 percent. For foreign entities, the limit has been set to 49 percent.

The shareholding of such resident individuals and domestic institutions should be brought down to not more than 51 percent or 26 percent in 10 years from the date of commencement of business.

The shareholding of foreign promoters, directly or indirectly,  individually or together with persons acting in concert, shall be brought down  (to either  26 percent or 15 percent) in 10 years from the date of commencement of business.

At least 50 percent of the ownership of the proposed MII shall be with Individuals/Entities having experience (five years or more) in the area of capital markets or technology related to financial services.

The Sebi board meeting is being held after the technology advisory committee meeting on March 22 to discuss the National Stock Exchange technical glitch. The regulator’s board may also discuss the NSE glitch during its meeting.