Sebi mulls delisting of suspended companies

BSE proposes to market regulator the counters be dropped off; NSE also in talks

The Securities and Exchange Board of India (Sebi) is considering delisting companies suspended on exchanges for more than five years, a source said.

In a representation to Sebi recently, the BSE (formerly Bombay Stock Exchange) proposed counters that had been suspended for seven years be delisted. The National Stock Exchange (NSE), which has close to 170 suspended companies, is also in talks with Sebi.

“Sebi has received the BSE’s proposal and is favourably considering it,” said a source. An e-mail to Sebi did not get a response. “We have made a representation to the regulator,” said an NSE spokesperson.

“A suspended company that does not intend to remain listed cannot go through the reverse book-building exercise for delisting. There is a need for them to be exempted,” said a source. A merchant banker said Sebi had informally started allowing suspended companies to delist. “If I approach Sebi with a proposal for automatic delisting of a suspended company, I will not find it averse to the idea, provided the interests of shareholders are protected,” said the banker.

Before allowing delisting of the suspended companies, Sebi will ensure the counters are moved to the dissemination board so investors can receive their dues by connecting with parties to buy or sell their shares. A dissemination board is a facility hosted by exchanges for bilateral settlement in counters that are no longer listed.

The BSE said it had proposed to delist the suspended companies from the exchange and transfer them to the dissemination board. Sources said the BSE proposal contained a list of 1,000 companies that had been suspended for seven years.

The BSE also provided an analysis of companies suspended for penal reasons. A total of 150 companies have been suspended for less than two years, 70 others have remained suspended for three to six years. “The BSE has proposed such companies be granted a specific period to complete formalities for resumption of trading,” said a BSE spokesperson. If that does not work, the exchange will follow it up by moving the counters to the dissemination board.

“A number of companies suspended by the exchange in the last decade have not initiated revocation formalities. Their shareholders are deprived of an exit route,” said the BSE spokesperson.

“Firms wanting to exit find the listing compliance mechanism cumbersome. A seamless delisting mechanism will protect interests of investors,” said Mahavir Lunavat of Pantomath Advisory Services Group.