The Securities and Exchange Board of India is likely to announce changes to the delisting guidelines after its monthly board meeting scheduled later next month.
The possible changes range from compulsory delisting of shares in case of companies with miniscule public shareholding to penalties for promoters of non-compliant companies and defining a formula for companies to arrive at a delisting offer price.
According to the delisting guidelines in force now, companies seeking to delist have to do so at a price determined through a reverse book-building mechanism.
Since the reverse book-building route allows an investor in a company to bid at prices way above the traded prices, it usually turns out to be a costly affair for promoters who wish to merely seek delisting.
Besides, if a stock exchange delists a stock for any reason, the promoters would have unlimited liability by having to buy out public shareholding at a rate to be fixed by arbitrators of stock exchanges. Currently, no stock exchange has arbitrators.
Even since these delisting guidelines came into effect in February 2003, the number of companies which have gone in for delisting have come down dramatically.
Sebi chairman M Damodaran had said in an earlier interview with that the delisting guidelines would seek to fetch investor a fair price while not losing sight of the fact that facilitating an exit is equally important since in several companies the exit window is closed due to low liquidity.
Currently, out of the 9000 odd listed companies, only a quarter are actively traded in market. The rise in penny stocks, especially errant or non-compliant companies, has raised concerns about price manipulation. The government and the regulators have expressed their concerns over this.
The focus of the delisting guideline will be to ensure that only companies that are compliant and serious about a listing remain while others quit.