The promoters have the choice to accept such final price or to decline the offer and must then follow due process indicating failure of delisting. Marosi and Massoud (2007) find that firms with fewer valuable growth opportunities, higher leverage, and lower market momentum tend to go dark. com Registered Office: Shikhar, Nr Mithakhali Six Roads, Navrangpura, Ahmedabad - 380 009, Gujarat, India. Although the answers are to be examined on a case to case basis, it is possible to evaluate if each of these has influenced the decision to delist in India. Such arbitrageurs purchase shares about to be delisted to influence the final price in a manner which profits themselves. Companies tend to delist during the times of economic slump based on the justification that the share price does not correctly reflect the true worth of the company. Adani Power surged 7.69percent to Rs 39.20 after the company said its board will meet on 3 June 2020 to consider a proposal to delist equity shares from the domestic stock exchanges. Regulations to the Oelisting Proposal and consequent voluntary delisting of Adani Power Ltd Adani Corporate House Shantigram. Therefore, the costs would be a reason for illiquid companies. and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. There may be other causes such as the cost of staying public are no longer outweighed by the benefit (Bharath and Dittmar, 2010). If accepted, the merchant banker shall announce the final price and the promoter’s acceptance. Below is the timeline on how the process will play out. Various reasons have been ascribed internationally. In a major development, Adani Power board on Monday approved the proposal to delist the company's equity shares from stock exchanges. Interestingly, proxy advisors recommended to shareholders that they do not tender their shares since a growth in revenue was expected. A compulsory delisting is the result of a breach which could entail not meeting the necessary disclosure requirements. The SEBI’s July 2018 Discussion Paper on Delisting Regulations has acknowledged these concerns and further pointed out that even promoters may indulge in unscrupulous behaviour by selling stakes to “friendly shareholders” who would then bid at a price level which unduly favours the promoters in the reverse book building process. We take the quality of the messages posted on forum as seriously as our articles. Post. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. We are likely to conclude delisting by December or till the end of this financial year,” Sardana said responding to a query. Here, shareholders have exercised the options available to stall delisting. The Adani Power board on June 3 will also discuss the appointment of a merchant banker registered with SEBI for carrying out due diligence as required in terms of Regulation 8(1A)(ii) of the SEBI Delisting Regulations. Arvind Kumar Tiwari, second year student at National Law University, Delhi. Considering the loopholes in the current delisting procedure, there seems to be an emerging need to revamp the existing delisting mechanism and replace the complex reverse book building process to fix the final offer price. We take the quality of the messages posted on forum as seriously as our articles. This opens up the possibility of bids being entered at a price level which the company may not find acceptable and accordingly, it may reject the offer price, leaving the shares listed. The final offer price of shares is the price at which the maximum number of shares are tendered by public shareholders. A share may be delisted from a stock exchange voluntarily or compulsorily. The same result holds if a smaller set of companies reporting information throughout the period of the analysis is taken. Suranjali Tandon is Assistant Professor at the National Institute of Public Finance and Policy. Adani Power declined over 3% to Rs 38.70, while Adani Port fell 2% to Rs 333.35 on Thursday. SEBI (Delisting of Equity Shares) Regulations, 2009, mandate that a company seeking to delist its shares from one or more recognised stock exchange having nationwide terminals, is required to provide an exit opportunity to all its public shareholders. After the bids are audited, the final offer price is determined, which is the price at which the maximum number of public shareholders have offered shares to the promoters. In the wake of COVID-19, more companies are expected to delist and this is a time to evaluate how effective the existing delisting regulations are to smoothly conclude a delisting transaction. final offer price or a bid lower. 8.21 PM Dec 11th . In 2018, Securities and Exchange Board of India enforced SEBI (Delisting of Equity Shares) (Second Amendment) Regulations, 2018 pursuant to the aforementioned Discussion Paper and it added a provision which allowed the public shareholders to make a counteroffer if they are not satisfied with the price discovered in Reverse Book Building Process. For example, a company with share capital between Rs 400 crore and Rs 500 crore has to pay annual fees of Rs 6 lakh and Rs 7.3 lakh to BSE and NSE respectively. Over the years there have been delistings in India for each of the these reasons. However, it failed to delist due to the lack of shareholders’ response. Consequently, a number of companies, like Vedanta, Adani Power and Hexaware Technologies, have triggered the process of voluntary delisting. In addition to the approval by the board of directors, a special resolution must be passed after at least twice as many public shareholders agree to the delisting as those that disagree, based on the explanatory statement provided to the shareholders, and a floor price must be fixed at which the shares will be acquired. rrb/sn/vd Another important consideration for a listed company is dividend payout. Then there are reasons such an inability to take advantage of the stock market. If shareholders object to the timing of delisting … In each of these cases, shareholders must act in consonance. The offer price is determined through the Reverse Book Building process and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. SEBI should consider the possibility of making book value the benchmark to determine floor price at the time of the original offer as it allows a more reasonable and fair price discovery at the initial stage itself. Furthermore, a floor price is fixed to carry out reverse book building but no price ceiling is prescribed and the final price is completely dependent upon the wisdom of the public shareholders. Step 1: Vedanta Limited will seek shareholders’ approval for the delisting proposal by way of a special resolution through postal ballot and e-voting (This can typically take 4-5 weeks). I find that, on average, companies were either making higher losses or reporting lower profits before their delisting and report better financials after delisting. Karnataka origin Dr Vivek Murthy to head Covid task force under Biden Parties on edge as many Bihar seats to … That said, there are concerns that promoters may wish to profit by delisting, particularly during a bad phase in the market. Anil Sardana, managing director and CEO, Adani Transmission ltd and MD-thermal at Adani Power in a media call on Thursday said the deslisting process of Adani Power is in process. Pour and Lasfer (2015) find that companies delisting from the London Stock Exchange’s Alternative Investment Market do so since they were unable to raise funding so their inside ownership and leverage remained high.