| The Securities and Exchange Board of India (Sebi) is reviewing the delisting guidelines it had issued in 2003. The Sebi move is prompted by the reactions of companies which are said to be very unhappy with the price discovery system through the reverse book-building method.
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| Senior Sebi officials confirmed this, saying that they were working on the revised guidelines and the amendments would be issued within a month.
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| While the reverse book-building method itself may not be scrapped, the regulator will introduce a gamut of changes so that the revamped system results in more efficient price discovery.
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| After the introduction of the Sebi-mandated reverse book building system for delisting, only a handful of companies have taken this route.
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| Among these are Hewlett-Packard, which offered an exit option to the investors of Digital GlobalSoft. But merchant bankers have said that the reverse book building method is susceptible to market manipulation in that operators pull up the price of the target scrip ahead of the record date so as to jack up the offer price which is calculated as an average of prices in the previous six months.
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| Recently, making a bid to delist Vickers Systems, Eaton Corporation refused to accept the Rs 185 per share price that had been arrived at through the reverse book-building method.
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| Under the guidelines, the floor price is determined by calculating the average of prices in the 26 weeks prior to the date of announcement. However there is no cap and corporates feel that the final price may be manipulated by groups of investors.
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| One of the major changes expected is that de-listing should commence if the non-promoter shareholding falls below 25 per cent. At present there is a lot of ambiguity over this threshold level since Sebi’s Takeover Code allows up to a 90 per cent stake for promoters.
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| Further the listing agreement specifies various levels at which corporates can remain listed depending upon when the company listed on the bourses.
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| If the 25 per cent limit is finally fixed it would resolve once and for all as to when a corporate would have to delist and this will produce uniformity on how much stakeholding a promoter should have in a company.
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| Sebi officials, however, said that they had not yet thought of a price band within which the bidding could be done, though merchant bankers said that a price band could provide an indicative range to the investors even though the final price may not exactly fall with the range. |
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