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Sebi may tighten delisting norms

Janaki Krishnan & Sangita Shah

The Securities and Exchange Board of India is mulling a proposal to tighten delisting norms to stem the rush of Indian arms of multinational companies moving to delist from the Indian bourses.

Sebi chairman G N Bajpai is learnt to have raised the issue at a recent meeting with merchant bankers.

According to sources, Sebi has asked merchant bankers to come up with some solutions; the market regulator itself may be framing some regulations to discourage this trend.

The industry view is that the withdrawal of MNC stocks will have a narrowing effect on the market.

No details are available as to how Sebi proposes to achieve this, but sources said some regulations might be put in place in consultation with the stock exchanges and the central government.

It is expected that some amendments to the delisting norms may also be made. The methodology of arriving at the price at which the shares are bought back may also undergo a change, sources in the know said.

It may be recalled that Sebi is pushing for the listing of shares of MNCs that entered India and were supposed to have started making profits within three years of their setting up operations.

During the last financial year, around 18 MNCs initiated the process of delisting from the local markets. Prominent among them are Wartsila, Philips India, Carrier Aircon, Reckitt Benckiser and ITW Signode.

The market estimates that another 90 MNCs are waiting to buy back their shares from the Indian public. In 2000-01, eight companies delisted themselves, the year before that only six did so.

Merchant banking sources said delisting procedures also have to be streamlined.

Sebi has said that companies delisting should keep their repurchase window open for 18 months so that all investors can take advantage of the buyback offer made by the parent company.

"But it often happens that some investors are either not aware of the development or do not have any idea how to go about tendering their shares and they are stuck with stock which is practically worthless," they said.

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