Clause on participation of 25% investors not applicable if bankers show all shareholders have been contacted
Mumbai: The Securities and Exchange Board of India, or Sebi, on Thursday, relaxed its recently announced delisting norms, after certain practical difficulties were highlighted by market participants.
On 19 November, Sebi had revamped the delisting norms and had said that a firm wanting to delist has to ensure that at least 25% of public shareholders tender in the reverse book-building process or that its promoter shareholding reaches at least 90% after acquiring shares from the public.
At a board meeting on Thursday, Sebi diluted some of these norms.
“...if the acquirer and the merchant banker are able to demonstrate that they have contacted all public shareholders about the offer in the manner prescribed, then the condition of mandatory participation of 25% of the public shareholders holding shares in demat mode would not be applicable," said Sebi.
Delisting means the permanent removal of securities of a listed firm from a stock exchange.
The relaxation came after investment bankers highlighted that the new norms may make it difficult for companies to delist.
“Although the 25% minimum subscription requirement from public in delisting was a soft norm, it could create practical difficulties for firms to delist, especially those that are fairly old and well-established. People who must have bought shares in such firms are spread across multiple locations in the world and ensuring a participation from them in delisting can be cumbersome," said Prithvi Haldea, chairman and managing director, Prime Database, a New Delhi-based primary market tracking firm.
Haldea, however, said Sebi is trying to ensure that companies looking to delist must reach out to all the public investors.
“Earlier, firms were not even taking enough steps to inform public investors and verify that investors are aware of the upcoming delisting issue. Now, such firms will need to inform all public shareholders and show it to Sebi clearly. This will improve transparency and corporate governance in the capital market space," said Haldea.
At its board meeting, Sebi also decided that in case of partly paid shares issued through a public or rights issue, a minimum 25% of the issue price will necessarily have to be received upfront. The balance consideration can be received within 12 months if the issue size is less than ₹ 500 crore. If the issue size exceeds ₹ 500 crore and the issuer has appointed a monitoring agency, the period can be decided by the issuer as per extant norms, Sebi said in a note.
Similarly, in respect of warrants issued along with a public or rights issue of specified securities, 25% of the consideration will have to be received upfront by the issuer and tenure of such warrants will be 18 months as against 12 months now.
The regulator also paved the way for consolidation and re-issuance of debt-securities, saying illiquid and infrequently traded corporate bonds can be re-issued, which may help in creating a larger floating stock that can enhance liquidity in the market.
Also, call and put options in such securities, which have been allowed now, will help the issuer and investors with a flexibility in redemption of debt securities.
Further, Sebi said firms exclusively listed on exiting regional stock exchanges will be given a period of 18 months to get listed on nationwide stock exchanges.
“…many of their exclusively listed companies have expressed concern that they are unable to get listed on nationwide stock exchanges due to shortage of time in complying with the listing norms of nationwide stock exchanges," Sebi said.
Over the past year, several regional stock exchanges have exited either due to their inability to comply with Sebi norms on minimum net worth of exchanges and a level of trading activity prescribed by the regulator.
The Hyderabad Securities and Enterprises Ltd (erstwhile Hyderabad Stock Exchange), Coimbatore Stock Exchange Ltd, Saurashtra Kutch Stock Exchange Ltd, Mangalore Stock Exchange, Inter-Connected Stock Exchange of India Ltd, Cochin Stock Exchange Ltd, Bangalore Stock Exchange Ltd and Ludhiana Stock exchange Ltd have been granted approval to exit exchange operations.