sebi: Some investors oppose changes to delisting rules
The capital markets regulator had requested public comment by July 16. Some investors have written to Sebi that the new proposals, in particular the weakening of reverse book building (RBB) rules, could tip companies’ results.
“A write-off price offered by the acquirer would practically kill the very spirit of the write-off regulations, and therefore this must be done through RBB only with the price discovered by the public shareholders,” said Anil Jindal, director of Jindal. Securities.
Sebi came up with a fixed concept of a “higher price” that the acquirer is willing to pay for delisting. This will be in place of the price discovered through the constitution of a reverse ledger in which public shareholders can tender their shares at any cost they deem to be the correct value of the shares.
The regulator suggested that if the acquirer wishes to withdraw from the listing, differential pricing should be offered. The open offer price for delisting must be greater than the minimum offer price. If the response from minority shareholders leads to the 90% delisting threshold being reached, all shareholders who tender their shares must be paid the delisting price.
In a separate letter to Sebi, investors said the proposed changes would shift “bargaining power” from shareholders to promoters. They don’t want any change in the RRB process.
“If the acquirer intends to delist, he should only do so through the RBB process with the price discovered by public shareholders rather than given by the acquirer, otherwise the objective of delisting regulation would be defeated, ”one of the investors said in a letter. to Sebi.
Currently, buyers not only have the option of accepting or rejecting the price discovered through RBB, but they can also make a counter-offer.
“Some of the proposed changes are good, but changing the RBB process is unfair to small shareholders,” said Shriram Subramanian, founder of proxy consulting firm InGovern Research Services.
Investors cited the example of
and Linde India’s unsuccessful delisting offers. They said the RBB process alone protects public shareholders from acquiring their shares at lower prices.
Last October, Vedanta made an unsuccessful delisting attempt at a floor price of? 87.25. But LIC-led investors demanded 320? per share, a premium of 267% over the floor price. Vedanta shares rose 240% in six months to a high of? 296. This was the case when the Linde India delisting attempt failed.
“The open offer and the delisting offer are two completely different types of transactions with different expected results and must be executed separately,” Jindal said.
“The factors that investors take into account when participating in the two are completely different and the proposed method would be extremely complex for investors to make an informed decision.”
The investors also urged Sebi not to modify the special resolution stipulated in Article 11 (4) of the Delisting Regulations. The rule says, “The special resolution will only be executed if the votes cast by public shareholders in favor of the proposal are at least twice the number of votes cast by public shareholders against it.” ”
The proposal that a special resolution to approve the delisting should be considered passed on the basis of an “affirmative vote of the majority of minority shareholders” should also be dropped, one of the letters said. This rule will allow companies to pass delisting resolutions with the approval of 51% of shareholders instead of 66% under current rules.