The Securities and Exchange Board of India has decided to examine the reverse book-building process under its Delisting Regulations.
The review comes in light of several concerns expressed by the industry, the regulator said during a media briefing on Monday.
The existing process of reverse book-building can be manipulated and is unsustainable for the listed company, Chairperson Madhabi Puri Buch said.
Under this process, the price at which a company can be delisted is arrived at through eligible bids received for 90% of the shares of the company. Certain market players, in anticipation of the delisting, acquire up to 10% of the shares of the company, raising the price of the rest of the shares. As a company cannot be delisted without receiving eligible bids for 90% of the shares, the delisting fails, making the route unviable for most companies, she highlighted.
To address this, SEBI is considering a fixed price option for delisting. If that fails, the reverse book-building process may be employed. If that also fails, an extra two to three years can be given, which will go a long way in helping companies that do not want to be listed, Buch said.
Apart from delisting, the regulator is also looking at the challenges faced by insiders vis-à-vis their trading plans.
Currently, perpetual insiders of a company—such as promoters—have to disclose their trading plans six months in advance when they want to buy or sell shares of the company, which ties them for a period of 12 months even if the price of shares fluctuates heavily. This doesn't allow for making changes.
SEBI is now considering revising these regulations to allow for more flexibility. A consultation paper on this could be issued by the end of August, Buch said.
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