Overhauling of delisting norm – a step towards the right direction
SEBI sub-group and came up with the proposal to overhaul the SEBI (Delisting of Equity Shares) Regulations, 2021 – the proposal is currently out for public comments. In addition to certain tweaks in respect of the counter-offer mechanism, computation of floor price and related reference date, the proposal seeks to provide an alternative to the long-standing Reverse Book Building (‘RBB’) mechanism.
One look at the proposed draft is enough to realise the effort of SEBI to fine-tune the delisting mechanism to make it more efficient.
Current scenario
Currently, a delisting is considered successful when (a) the post-offer shareholding of the acquirer, along with the shares tendered by the public shareholders reaches 90% (‘90% Threshold’); and (b) the price discovered pursuant to RBB is acceptable to the acquirer.
Where the RBB discovered price is not acceptable to the acquirer, the acquirer can make a
counter-offer at a price that should not be lower than the book value of the company, but only if the 90% Threshold is met.
Further, the RBB discovered price is the price at which the acquirer reaches 90% Threshold – thus, market has seen precedents where a shareholder holding big block bids at an exorbitant price, thereby making the deal unsustainable.
