The Hindu Business Line : Simplified exit route vital for cos opting to delist: FICCI

PERTURBED by the current delisting procedures, corporate sector has pitched for a simplified norm for listed companies to exit from a stock exchange. The Capital Market Committee of Federation of Indian Chambers of Commerce and Industry, headed by Ms Naina Lal Kidwai, has urged the stock market regulator, Securities & Exchange Board of India (SEBI) for the same.

In its comments on the draft SEBI (Delisting of Securities) Regulations, 2004, to the regulator, the chamber has said "Considering that a listed company status casts onerous obligations on corporates, the regulations ought to give companies a fair opportunity to exit the listed market subject to adequate systematic safeguards, rather than render it impossible to delist from the stock exchanges."

On the provisions pertaining to applicability norms, the chamber said, in the proposal, SEBI needs to clarify the minimum shareholding levels beneath which the delisting trigger will be pulled.

Currently, the minimum public holding varies from 10 per cent to 60 per cent depending on when a company got listed. On the other hand the takeover code specifies delisting only if the public holding falls to less than 10 per cent.

It is suggested that compulsory delisting of companies should be done where public shareholding falls below 25 per cent. In cases where the free float is above Rs 100 crore, then it should be done only when the same falls to less than 10 per cent, the chamber said.

Further, the guidelines are silent on status of companies in which promoter holding is already above levels specified in the listing agreement, the FICCI said.

"If a company in such a situation decides to go in for the reverse book building process then as per the draft guidelines, even if it receives only one share at an extremely high price it will be forced to delist at that price. Safeguard needs to be provided against this by specifying a minimum level of acceptance below which the company is given the option not to delist without having to make an offer for sale or fresh issue of shares," the chamber said.

Commenting on the special provision in the draft proposing delisting pursuant to a rights issue, the chamber said, allowing this route may result in all companies wanting to delist using this method, as the buyback and preferential allotment route will be closed.

"There is a need to re-think on this provision, as it would be possible that when a company is fairing badly, the price could remain subdued for 26 weeks. Then the company makes a rights issue close to market price. The rights issue would, hence, be undersubscribed, which can be mopped up by the promoters. They can then make an open offer at the same low rate," the FICCI said.

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