SEBI Streamlines Voluntary Delisting Process with Fixed Price Option

The Securities and Exchange Board of India (SEBI) has announced significant reforms to the voluntary delisting process, offering companies a new fixed price mechanism as an alternative to the existing reverse book building (RBB) model.

Fixed Price Option Enhances Transparency

Under the new framework, companies seeking to delist their shares can offer a fixed price to public shareholders. This price must be at least 15% above the floor price mandated by SEBI regulations. SEBI chairperson Madhabi Puri Buch emphasised the importance of providing a clear exit path for companies, stating, “A vibrant market allows for entry and exit. We welcome companies to list, but if they need to delist, they should be able to do so in a transparent manner.”

Addressing Concerns with RBB

The RBB model, where shareholders propose a selling price, has been criticised for its potential for market manipulation. SEBI has addressed these concerns by:

• Reduced Counter-Offer Threshold: The minimum public shareholding required for a counter-offer has been lowered from 90% to 75%, provided at least 50% of public shares are tendered.
• Enhanced Counter-Offer Price: The counter-offer price must be at least higher than the average price discovered through the RBB process and the indicative price (if offered by the acquirer).

New Option for Listed Investment Holding Companies

SEBI has also introduced a new delisting framework for listed investment holding companies with at least 75% of their fair value in direct investments in other listed firms. These companies can now:

• Proportionately distribute listed shares directly to public shareholders.
• Offer proportionate cash payments to public shareholders in exchange for their holdings, with the cash derived from selling other assets such as land, buildings, or unlisted companies.

Overall, these reforms aim to:

• Increase transparency and fairness in the delisting process.
• Provide companies with a more flexible and efficient approach to delisting.
• Protect the interests of public shareholders.

SEBI’s move signifies its commitment to a well-functioning and investor-friendly capital market in India.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.