The initial public offering of Chemplast Sanmar has generated heated debate in market circles. The reason: The stock was delisted nearly a decade ago from the stock exchanges at ₹15 a share whereas it has now hit the market with an IPO price of ₹540.

As some market experts could not see the rationale behind the huge difference between the delisting price and the IPO price, they raised a lot of hullabaloo in social media. Some even wondered how market regulator Securities and Exchange Board of India cleared the IPO.

However, Chemplast Sanmar has followed the rules while delisting and also during the IPO process.

Delisting proposal

According to SEBI regulation, in case of voluntary delisting, promoter of a company must disclose a floor price, which should be the average price of preceding 26 weeks from the date of public announcement. The shareholders have to place bids at a price either at or above the floor price through the reverse book building process. If the discovered price through reverse book building is acceptable to the promoter, he or she fixes that as an exit price for delisting. In case of Chemplast Sanmar, the discovered price was ₹15, which the promoters had accepted and proceeded with delisting.

However, promoters can also reject the price if they feel it is too high. There are instances where delisting could not materialise even after several attempts such as Vedanta and AstraZeneca, as investors demanded a higher premium from promoters.

Then and now

As far IPO pricing is concerned, the face value of a share is ₹5 today as against ₹1 a share when the stock was delisted in 2012. In recent years, shares of listed speciality chemicals makers have gained a valuation premium at the bourses with some turning multi baggers by gaining five times.

The BSE Sensex, BSE Midcap and BSE Smallcap have registered new peaks in June 2021. Chemplast Sanmar too posted a consolidated PAT of ₹410 crore in FY21 as against a loss in 2012. If someone believes that the pricing is high, he or she can still stay away from the IPO and can enter the stock through the secondary market at their desired price.

Any promoter who desires to list, delist or even relist should be given the opportunity to do so through a vibrant market.

The seamless Chemplast Sanmar issue has highlighted how vibrant our capital market is. SEBI, recently, made several changes with regard to delisting rules and the most welcome proposal is reducing the period to 3 years from earlier 5 years in case delisted company wanted to come back to the bourses.

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