A worker cleans the glass of the Securities & Exchange Board of India in Mumbai (Photographer: Adeel Halim/Bloomberg)

Delisting: SEBI Allows Promoters To Make Counter Offer

The Securities and Exchange Board of India has allowed promoters to make a counter offer to shareholders of companies that are planning to delist from stock exchanges, a move aimed at plugging loopholes in the current method.

The market regulator has put in place a system for price discovery as per reverse book building method, along with considering counter offer of promoter. Currently, if the price discovered through reverse book building is not attractive to the promoter, he may unilaterally reject the price and the whole exercise becomes futile.

Under the new rules, the promoter will be allowed to make counter offer to the shareholders. If the counter offer is lucrative to the shareholders and if it is accepted, delisting will be successful.

Further, in case promoters give a counter offer, and if it is not less than the book value, then the offer will be accepted by public shareholders, where the promoter shareholding reaches 90 percent.

If the price discovered....is not acceptable to the acquirer or the promoter, the acquirer or the promoter may make a counter offer to the public shareholders within two working days of the price discovered...in the manner specified by the board from time to time
SEBI notification

“Provided that the counter offer price shall not be less than the book value of the company as certified by the merchant banker,” the notification added.

According to SEBI, promoters and whole-time directors of the compulsorily delisted company will also not be eligible to become directors of any listed company till the exit option.

Between 2015-16 to 2017-18, a total of 15 companies got voluntarily delisted, by following the reverse book building process. Seven companies got delisted at the floor price and 8 firms got delisted at a premium ranging between 7.7 percent and 242 percent.

Earlier in July, the regulator had come out with a draft proposal in this regard and had sought views of all the stakeholders.