| The Securities and Exchange Board of India is likely to announce changes to the delisting guidelines after its monthly board meeting scheduled later next month.
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| The possible changes range from compulsary delisting of shares in case of companies with miniscule public sharholding to penalties for promoters of non-compliant companies and defining a formula for companies to arrive at a delisting offer price.
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| According to the delisting guidelines in force now, companies seeking to delist have to do so at a price determined through a reverse book-building mechanism.
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| Since the reverse book-building route allows an investor in a company to bid at prices way above the traded prices, it usually turns out to be a costly affair for promoters who wish to merely seek delisting.
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| Besides, if a stock exchange delists a stock for any reason, the promoters would have unlimited liability by having to buy out public shareholding at a rate to be fixed by arbitrators of stock exchanges. Currently, no stock exchange has arbitrators.
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| Even since these delisting guidelines came into effect in February 2003, the number of companies which have gone in for delisting have come down dramatically.
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| Sebi chairman M Damodaran had said in an earlier interview with Business Standard that the delisting guidelines would seek to fetch investor a fair price while not losing sight of the fact that facilitating an exit is equally important since in several companies the exit windown is closed due to low liquidity.
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| Currently, out of the 9000 odd listed companies, only a quarter are actively traded in market. The rise in penny stocks, especially errant or non-compliant companies, has raised concerns about price manipulation. The government and the regulators have expressed their concerns over this.
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| The focus of the delisting guideline will be to ensure that only companies that are compliant and serious about a listing remain while others quit. |
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