INSUBCONTINENT EXCLUSIVE:
Mumbai: Companies with delisting plans that have been stalled by minority shareholders seeking a vastly higher buyback price may soon get a
The Securities and Exchange Board of India (Sebi) is planning to introduce price bands in the delisting process that will mean investors
having to tender shares within that range, said two people familiar with the proposals.
The move is aimed at preventing investors from
cornering shares and driving them up, well above the floor price, before they tender their shares, a move that has resulted in several
Others said such a move may unduly favour promoters.
This proposal was discussed by the Sebi-appointed Primary Market Advisory Committee
(PMAC) last week, said the people cited above
the price companies need to pay public shareholders to buy back shares to delist
The delisting price is the average of that sought by the majority of public shareholders
Companies and investment bankers allege that groups of investors corner shares and seek abnormally high prices to tender their
shares.
Several multinational companies that had planned to delist their Indian arms were forced to abandon the process because of this,
director and CEO, Axis Capital
Indo Tech Transformers, DIC India and Ricoh India among others have failed to delist in the recent past due to a rally in stock prices after
making delisting announcements.
US-based CSC globally acquired London-based Xchanging in 2016 and made an open offer for Xchanging
Solutions, the Indian arm
After the company announced delisting plans, Xchanging Solutions more than doubled from Rs 50 in early May 2016 to a high of Rs 106.65 on
August 31, against the offer price of Rs 40.51
The discovered price was Rs 109, which was not acceptable to the company, forcing it to scrap delisting plans and announce a fresh
open-offer schedule.
Valuation expectations start building even before the delisting process begins, according to bankers
A company in India can be delisted if an offer results in the promoter holding exceeding 90%, or the promoter acquiring at least 50% of the
public holding, whichever is more.
Minority shareholders have been expecting high valuations because of the delisting of a few
multinationals at an attractive premium in the recent past.
Earlier this year, US-based Virtusa Consulting Services, which had acquired
Polaris Consulting Services, announced a delisting offer at a floor price of Rs 232 and later gave an indicative price of Rs 370 per share
The stock price more than doubled after the announcement in mid-October 2017 until the last day of the offer on February 5, 2018
restriction on the discovery price is not in the interest of minority shareholders and Sebi as a market regulator should not favour only
