Exit Option: Investors Grope In The Dark

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: Numerous cases of delisting of shares by bluechip companies prompted the Securities and Exchange Board of India (Sebi) to set up an internal committee on delisting last year. The main concern playing on the minds of the investors was that the delisting was being carried out in a manner that leaves them with no choice but sell their shares, often at a perceived significant undervaluation. These guidelines were meant to protect the interests of the small investor as they played a major role in the decision-making process regarding the exit price and they could not be forced to accept the low prices offered by companies.

However, despite the delisting guidelines, there have been certain instances where companies are now trying to skirt the Sebi provisions and are taking refuge under the Companies Act to buy back shares and delist, say market sources. Add to this, a certain section of investors are still critical of the Sebi guidelines and are complaining that it is not up to the mark and still harms the interests of the small investor.

Take the instance of Dr MG Joshi who has holdings in nearly 500 companies. Dr Joshi, who is also a shareholder in Mather & Platt, attended the company’s annual general meeting in Pune on September 1, 2003. There he was told that a Pune court has approved amalgamation of the company and shareholders with less than 500 shares will have to sell their shares to the company and exit. Dr Joshi alleges that when he demanded a copy of the said judgement, the company did not bother to comply. Dr Joshi avers that this is yet another tactic of the company to delist and vows that he will never sell.

This is not the first time that Dr Joshi has faced a situation like this. Even earlier, when the German company Mico had announced its intention to delist, Dr Joshi had received three offers from them which he turned down and recently he received a dividend of Rs 40 per share from them. Similarly, Dr Joshi had 125 shares of Bharti Telecom. The telecom company made around 7-8 offers to Dr Joshi to buy back its shares but he held on and finally the company gave him 120 shares of their sister company without any payment.