Sebi's latest discussion paper on the matter comes against the backdrop of concerns raised by various entities about existing delisting process which at times is also seen as time consuming.
The Securities and Exchange Board of India (Sebi) has mooted ways to bring down the time taken for completion of delisting process. Besides, the watchdog has proposed measures to make price discovery more broad-based to ensure that minority shareholders' interests are taken care of.
Mooting a significant change, Sebi has proposed that a delisting offer could be deemed successful if the holding of the promoter (or acquirer) reaches 90 per cent post offer.
Under current norms, a delisting offer shall be deemed to be successful if post offer, the shareholding of the promoter reaches 90 per cent or 50 per cent shares of the total offer size is purchased.
"... if there is no requirement of prior approval of the shareholders by special resolution and in-principle approval from stock exchange, it would considerably reduce the timeline to complete delisting process," Sebi said.
Currently, a delisting process takes about 137 days for completion. As per the discussion paper, the whole process could be completed in about 64 days from the day company informs exchanges or convenes a board meeting in this regard.
"Approval of the shareholders would in any case be evident through their participation or otherwise in the RBB process. Thus, this step may be discontinued.
"... as regards the existing requirement of obtaining in-principle approval from stock exchange(s), the same may no longer be necessary as only compliant companies are proposed to be eligible for delisting," the discussion paper noted.
To ensure that minority shareholders are adequately compensated, Sebi has proposed changes to existing price discovery mechanism for delisting process.
The Reverse Book Building (RBB) process could be modified by providing due weightage to "collective expectations of minority shareholders who individually may be holding a smaller number of shares".
Apart from suggesting fixed price mechanism for delisting, Sebi has also said that there could be a "counter offer" process whereby the acquirer is given an option to make a counter offer to public shareholders instead of rejecting the discovered price.
"Minority shareholders' interest in the delisting process may be better served if there are sufficient safeguards built in the process so that the exit price is fair, transparent and not detrimental to the investors' interest," it said.
The discussion paper titled 'Review of Delisting Regulations' would be open for public comments till May 30.
To make sure substantial participation of retail investors in delisting offers, Sebi has suggested that they can be allowed to bid at the cut-off price similar to an IPO process.
"The cut-off price may be determined via RBB (Reverse Book Building) or any other suitable formula. This may provide an option to those retail shareholders who find it difficult to comprehend the RBB process," it said.
According to Sebi, there might not be a need to have two different thresholds for a delisting offer to be successful since large number of listed companies have complied with the minimum shareholding norms.
"In view of the same, for a delisting offer to be considered successful, the shareholding of the promoter/ acquirer post-offer should reach ninety per cent of the total issued share capital, in line with internationally accepted practice," the discussion paper said.
With regard to public sector companies where promoter can hold up to 90 per cent, "it is proposed that the threshold level of buying out at least 50 per cent of the remaining public shareholders shall also remain," it added.
The market watchdog has proposed changes with respect to participation of Depository Receipt (DR) holders in delisting offers.
"... it may be considered to allow DR holders to tender their shares if the beneficiaries of all the DR holders are known," the discussion paper said.
Such a suggestion comes amid concerns over ultimate beneficiary of DR holders issued by companies to overseas investors, as through such instruments promoters might conceal indirect holdings in their own firms.
Since the introduction of Sebi (Delisting of Equity Shares) Regulations, 2009, there are have been about 38 delisting offers till March this year. The regulations were notified on June 10, 2009, superseding Sebi (Delisting of Securities) Guidelines, 2003.