MNC shares rally on buzz of delisting

Novartis, Asahi India Glass, Castrol, Colgate-Palmolive among stocks that rose as investors rushed to buy them

Shares of multi-national companies (MNCs) surged on Wednesday on reports that some foreign promoters might be considering making their Indian arms private. Stocks like Novartis, Asahi India Glass, Castrol India, Colgate-Palmolive were up on Wednesday as investors rushed to buy these stocks in anticipation of gains in the event of a delisting bid by these companies.

Participants said markets have been abuzz with talks about promoters looking for opportunities to exit the Indian markets. Rising share prices gives investors a good exit opportunity, they said.

“The time is right for any delisting activity in the market as the recent surge in stock prices will ensure good interest from the investors. But for the promoters it may not be so attractive as the share prices are high and companies would have to shell out more to buy back the shares from the market,” said Sunil Jain, VP, equity research, Nirmal Bang Securities.

Share bought back by the promoters during delisting is always at a premium to the current market price. With share prices already up owing to the rally seen in the market, analysts are concerned that the delisting expectations may push prices further and could possibly derail the delisting process. Already three companies – Fulford India, AstraZeneca and Essar Oil – are in the process of delisting from the Indian bourses.

Market experts believe there could be a spate of MNC delistings if market regulator Sebi finalises its proposed new delisting norms.

In May, the capital market regulator had floated a discussion paper proposing a complete revamp of the five-year old stringent delisting regulations.

The paper proposes to do away with shareholder approvals for delistings. Further, it says an in-principle nod of stock exchanges may no longer be needed. It aims to cut the time required for delisting a company from the bourses to just 64 days from present 137 days. More importantly, it also has proposed to ease the requirement mandating purchase of 50 per cent outstanding shares to ensure successful delisting.

The proposals, however, have met with oppositions from market players, who say the new rules would make delisting easier for MNC firms.