Security and Exchange boards of India have announced significant changes to the Delisting of Equity Shares. This change will provide companies with an alternative method to the traditional reverse-book building (RBB) process by introducing a fixed delisting price. SEBI said this was done to promote ease of doing business for the listed firms.

Under the fixed price framework, If a company is planning to delist its shares from the stock market, the large shareholder or the promoter will have to offer a fixed delisting price which is at least 15 per cent higher than the floor price of the stock.

“In case the acquirer has proposed delisting through the fixed price process, the acquirer shall provide a fixed delisting price which shall be at least 15% more than the floor price calculated in terms of regulation 19A,” SEBI stated.

The new framework will apply to companies whose shares are traded often. SEBI has also outlined new criteria for determining the floor price of the stock. It should be more than the highest price paid for any acquisition in the last 26 weeks or volume-weighted average price over the last one year or the adjusted book value.

"The counteroffer price shall not be less than the higher of the volume weighted average price of the shares tendered/offered in the reverse book building process; and the indicative price, if any, offered by the acquirer," SEBI said.

Additionally, the notification provided modifications for the counteroffer mechanism in case of delisting through the RBB process. The threshold for delisting success under the RBB process has gone down from 90% to 75% of public shareholder participation. The acquirer can now make a counteroffer if the public shareholders tender at least 50% of their holdings and the acquirer’s shareholding post-offer reaches 75%.

In addition, SEBI has also announced guidelines for delisting Investment Holding companies. These are the companies which have at least 75% of their value in direct equity investment in other listed companies. SEBI has allowed these companies to delist through the “selective capital reduction” method. This means that the company can reduce its share capital by buying back shares from public shareholders. Additionally, such investment holding companies will be permitted to make proportionate cash payments to their public shareholders against other assets, including investments in land, buildings and unlisted companies. If the entire public shareholding is extinguished, the IHC will be delisted.