Context: 

SEBI is reviewing delisting regulations for listed companies to prevent share manipulation in companies opting for delisting.

Delisting of Securities:

• Delisting means removing a listed company’s securities from a stock exchange.
• It can be voluntary (by the company) or compulsory (by the exchange as a penalty).
• For voluntary delisting, the company must buy back 90% of the issued shares.

Reverse Book-Building Process:

• The current process for delisting uses reverse book-building for price discovery.
• In this process, offers are collected from shareholders at various prices, determining the buyback price after the offer period.
• Issue with Reverse Book-Building:
  • Concerns have been raised about price manipulation during the delisting process.
  • Some entities accumulate shares to anticipate higher delisting prices, leading to unfair practices.

SEBI’s Review:

• SEBI is reviewing delisting regulations to address the issues raised with the current process.
• The regulator is considering a fixed price method as an alternative option for delisting companies.
  • In a Fixed price offer, the company specifies a fixed price at which it is willing to buy back shares from the public shareholders who wish to sell their shares.
• SEBI received recommendations from a committee headed by Keki Mistry and will seek stakeholder comments before finalizing changes.

Benefit of Fixed Price Method:

• Benefits depend on the specific methodology SEBI adopts for arriving at the fixed price.
• A holistic review will ensure a smoother process for promoters and shareholders.

News Source: The Indian Express