Delisting a costly affair: Promoters must be ready to pay through the nose

Taking a listed company private is a costly affair in India. The average delisting price sought by the public shareholders for the last nine delisting bids has been 2.4x the floor price set by the promoters.
 

While Vedanta failed to get the minimum bids required to delist, the indicative discovered price for the commodity major came in at Rs 320, 3.7x its floor price. In the case of Hexaware Technologies, the discovered price came in 80 per cent higher than the floor price.
 

Industry players said that public shareholders often get greedy with the asking price for tendering the shares. Also, the reverse book building (RBB) framework is skewed in favour of the public shareholders, they add. RBB is the process for arriving at a discovered price.

 

Shareholders are allowed to place bids at any price above the discovered price. The price at which the promoter shareholding crosses the 90 per cent-mark becomes the discovered price.
 

“The RBB framework is such that promoters seeking to delist, should be ready to pay through their nose or should be open to a setback,” said an analyst.