Important Updates on Delisting of Shares for ECIPL CS Executive

In 2024 and 2025, the Securities and Exchange Board of India (SEBI) introduced certain amendments to the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021. The intention of these  amendments  provide acquirers with more flexibility in voluntary delisting offers, including the introduction of a fixed-price offer (FPO) mechanism for companies with frequently traded shares. 

Key Changes and Features:

Fixed-Price Offer (FPO):

The amendment allows acquirers to propose a fixed price for delisting, which must be at least 15% higher than the floor price. This price is pre-determined and provided to all shareholders. 

Floor Price:

The floor price is determined by the higher of the volume-weighted average price (VWAP) of the shares traded during the past 52 weeks, the highest price paid for acquisitions during the past 26 weeks, or the adjusted book value, as determined by an independent registered valuer. 

Reverse Book-Building (RBB):

The amendments also address the RBB process, which involves acquirers setting a floor price and allowing public shareholders to tender their shares at a discovered price. A counter-offer mechanism is introduced to allow acquirers to make a counter-offer in the RBB process, which needs to be the higher of the volume-weighted average price of the tendered shares or the indicative price offered by the acquirer. 

Frequently Traded Shares:

The fixed-price offer is primarily applicable to companies whose shares are frequently traded. 

Incentives for Acquiring Shareholders:

The amendments aim to make the delisting process more predictable and give shareholders a meaningful exit opportunity. 

Floor Price Calculation:

The floor price is the highest of the VWAP, highest price paid, and adjusted book value. 

Fixed Price Delisting:

If the acquirer proposes a fixed price delisting, it must be at least 15% higher than the floor price, and the offer must be made to all shareholders. 

Counter Offer:

In an RBB process, the acquirer can make a counter offer if the initial offer does not achieve sufficient acceptance. 

FPO and RBB:

The fixed-price offer and the RBB processes provide acquirers with options for delisting, with the FPO offering more price certainty,

Effect:

The amendments are expected to streamline the delisting process, reduce price uncertainty for acquirers and shareholders, and lead to more successful delisting offers.  The inclusion of a fixed-price option and the revised floor price reference date will help mitigate the volatility and speculative activities associated with the RBB process.