Market regulator Sebi plugs critical loophole in new delisting regulations

The Securities and Exchange Board of India (Sebi) has plugged a critical loophole in the new delisting regulations.

On Wednesday, the market regulator amended delisting regulations to allow acquirers to make a ‘counter-offer’, in case price discovered through reverse book building (RBB) was not acceptable to them.

According to Sebi regulations, public announcement of a counter-offer by acquirer through stock exchanges should be made within two working days from the date of closure of the bidding process. Moreover, the public announcement regarding the counter offer should be published in the same newspapers where the original reverse book building announcement was made within four working days from the closure of the reverse book building process.

The shareholders should be given the option to withdraw the shares tendered within ten working days from the counteroffer announcement. The letter of offer for the counter offer should be dispatched within four days of the closure of reverse book building, and the counter offer should be opened within seven working days from the date of public announcement of the counteroffer, Sebi said in a circular.

The counter-offer bidding will be open for five working days.  And payment of consideration and return of equity shares should be made within ten working days from the closing of the counteroffer.

The loophole in regulations came to light during the delisting bid in Linde India. Experts said the delisting in the MNC firm had failed due to lack of clarity on the counter offer process. Promoters of Linde India decided to reject the price discovered through the reverse RBB process.

Delisting regulations have a provision for promoters or acquirers to make a counter offer if they can’t accept the discovered price. This must be done within two days of the determination of the discovered price. However, there were no operational guidelines for this, said experts.

The completion of the global merger between Linde AG and Praxair in November 2018 had triggered a mandatory open offer to Linde India shareholders.