SEBI to review delisting regulation among other measures

July 25, 2023
Posted by: OptimizeIAS Team
Category: DPN Topics

SEBI to review delisting regulation among other measures

Subject: Economy

Section: Capital Market

Context:

SEBI to 1. Review regulations for delisting of shares by considering a fixed price option, and 2. Review trading plans for insiders 3. To bring in a mechanism of instantaneous settlement in exchanges.

Key Points:

At present, 90 per cent stake by the parent or promoter is the threshold for delisting and price discovery is through a reverse book-building process.
SEBI is reviewing in view of certain constituents who have made it their business model to corner shares in the market before the delisting process and jack up prices, which may not be the fair price of the stock.
An advisory committee under Keki Mistry has been formed to relook at the delisting regulations, which is expected to be ready by the end of the year. One of the options being discussed is to have a fixed price for delisting of the shares.

Reverse Book Building

It is the reverse of the process followed in case of listing, here the purpose is to discover the right price to buy back all publicly held shares in order to achieve delisting.
In the Reverse Book Building scenario, the Acquirer/Company offers to buy back shares from the share holders. The Reverse Book Building is basically a process used for efficient price discovery.
It is a mechanism where, during the period for which the Reverse Book Building is open, offers are collected from the shareholders at various prices, which are above or equal to the floor price. The final buy back price is determined after the offer closing date.

Other Measures to come:

SEBI is looking at the prospect of introducing instantaneous settlement in exchanges so that pay in and payout, both of shares and funds can take place in real time through the use of UPI. Buch said that the technology was already there for it. SEBI would be looking at the response to the ASBA-like product in secondary market transactions in order to gauge its success before introducing instantaneous settlements.
Prohibition of insider trading regulations are also being revised, as the trading plan has to be declared in advance by companies locking them in to a certain price, and providing no flexibility for changes while deciding on the materiality of transactions. An advisory committee is looking into the regulations and a consultation paper on this is also in the works.
SEBI is also set to reform the way its disclosure regulations are being implemented by industry. It has required that corporations make disclosures with regard to rumours of a price-sensitive nature. The industry feedback is that this will be a challenge especially when news on companies is appearing in diverse media outlets. One solution being proposed is the setting up of industry devised standards.