On 25th September 2024, the Securities and Exchange Board of India (SEBI) has amended the Delisting of Equity Shares Regulations, 2024 which has now allowed companies to delist shares through a fixed price process as an alternative to the Reverse Book Building (RRB) process. This will help in facilitating ease of doing business for listed firms.
- These amendments are introduced by SEBI in exercise of powers given by section 31 read with section 21A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and section 30, sub-section (1) of section 11 and sub-section (2) of section 11A of the SEBI Act, 1992 (15 of 1992).
- These new regulations are now known as the SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2024.
Key Changes:
i.As per the new framework, promoters can offer to buy back all publicly held shares at a price that is at least 15% higher than the “fair price” of the stock.
- The new framework will be applicable to only those companies whose shares are frequently traded.
ii.The new framework has specified that in case the acquirer has proposed delisting through a fixed price process, the acquirer will provide a fixed delisting price which will be at minimum 15% more than the floor price calculated in terms of regulation 19A of these regulation.
iii.As per new regulations, the floor price cannot be lower than the highest paid in acquisitions made during the last 26 weeks preceding the reference date or any other criteria including volume-weighted average price paid by an acquirer in the 52 weeks preceding the reference date and adjusted book value.
iv.SEBI has reduced the limit for delisting success under the Reverse Book Building (RBB) process from 90% to 75% of public shareholder participation, provided that minimum 50% of public shareholding has been tendered.
v.The new framework has specified that investment holding companies (holdcos) are required to have at least 75% of its fair value comprising direct investments in equity shares of other listed companies.
- This fair value will be decided through a joint report by two independent valuers.
- SEBI has directed that the shares of the holdcos which get delisted will be prohibited to seek relisting for a period of 3 years from the date of delisting.
Note: The new fixed price process is estimated to save Rs 200 crore over the 5 years due to lower operational expenses.
Key definitions:
i.Fixed delisting price is the price offered by an acquirer for delisting shares
ii.Floor price is the minimum price in delisting proposals
About Securities and Exchange Board of India (SEBI):
SEBI is the apex regulatory body for securities and commodity market in India. It was initially established as non-statutory body in April 1988. Later, SEBI was accorded the status of statutory body through SEBI Act, 1992 on 30th January, 1992.
Chairman- Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
