The Securities and Exchange Board of India (SEBI) has announced amendments to the Delisting of Equity Shares Regulations, 2024, effective from their publication date. The amendments introduce key definitions such as “fixed delisting price,” which is the price offered by an acquirer for delisting shares, and “floor price,” the minimum price in delisting proposals. Acquirers must now deposit 25% of the total consideration in an interest-bearing escrow account upon obtaining shareholder approval, with specific provisions for calculating the total consideration based on the delisting method chosen. The regulations stipulate that the bidding period for delisting offers must commence promptly, and acquirers are required to announce the results within two days of bidding closure. Additionally, new regulations regarding the calculation of floor prices have been set, ensuring they reflect the highest market metrics. Furthermore, if delisting occurs via a fixed price process, the offered price must be at least 15% higher than the calculated floor price, and acquirers must accept shares if they attain a 90% post-offer shareholding. These updates aim to enhance transparency and compliance in the delisting process.

SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 25th September 2024

SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) (AMENDMENT) REGULATIONS, 2024

No. SEBI/LAD-NRO/GN/2024/206.—In exercise of the powers conferred by section 31 read with section 21A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and section 30, sub-section (1) of section 11 and sub-section (2) of section 11A of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021, namely: –

1. These regulations may be called the Securities and Exchange Board of India (Delisting of Equity Shares) (Amendment) Regulations, 2024.

2. They shall come into force on the date of their publication in the Official Gazette:

Provided that the provisions of these regulations shall be applicable to such delisting offers whose initial public announcement is made on or after the date of coming into force of these regulations:

Provided further that an acquirer may make the delisting offer in terms of the provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 as they existed before the coming into force of these regulations till the sixtieth day from the date of publication of these regulations in the official gazette.

3. In the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021, ─

I. in regulation 2, in sub-regulation (1),

i. after clause (l), the following clause shall be inserted, namely,-

“la) “fixed delisting price” means the fixed price offered by the acquirer for undertaking delisting of the equity shares of the company through fixed price process;”

ii. the existing clause (m) shall be substituted by the following clause, namely,-

“(m) “floor price” means the minimum price offered by the acquirer in terms of regulation 19A of these regulations, while making the proposal for voluntarily delisting of the equity shares of the company;”

iii. after clause (r), the following clause shall be inserted, namely,-

“ra) “Investment Holding Company” means a company which holds investments in listed or unlisted companies or holding assets other than such investments;”

II. in regulation 14,

i. the existing sub-regulation (1) shall be substituted by the following sub-regulation, namely,

“(1) The acquirer shall open an interest bearing escrow account with a Scheduled Commercial Bank, not later than seven working days from the date of obtaining the shareholders’ approval, and deposit therein an amount equivalent to twenty-five percent of the total consideration, calculated as below –

i. in case delisting is proposed through reverse book building process; the total consideration shall be calculated on the basis of the number of equity shares outstanding with the public shareholders multiplied with the floor price or the indicative price, if any given by the acquirer in terms of sub-regulation (4) of regulation 20 of these regulations; whichever is higher;

ii. in case delisting is proposed through the fixed price process; the total consideration shall be calculated on the basis of the number of equity shares outstanding with the public shareholders multiplied with the fixed delisting price offered by the acquirer.”

ii. the existing sub-regulation (3) shall be substituted by the following sub-regulation, namely,

“(3) Before making the detailed public announcement under regulation 15 of these regulations, the acquirer shall deposit in the escrow account, the remaining consideration amount being seventy-five percent of the total consideration amount calculated in terms of sub-regulation (1).”

III. in regulation 17,

i. in the marginal heading, after the word “Bidding” and before the word “mechanism”, the symbol and word “/ tendering” shall be inserted;

ii. in sub-regulation (1), the words “The bidding period shall start not later than” shall be substituted by the words and symbols “In case delisting is proposed through the reverse book building process or through fixed price process, the bidding period or the tendering period, as the case may be, shall begin within”;

iii. in sub-regulation (2), after the words “shall facilitate” and before the words “tendering of shares”, the word “the” shall be inserted;

iv. in sub-regulation (3), –

1. after the words “reverse book building process” and before the words “is announced within two hours”, the words and symbols “or the fixed price process, as the case may be,” shall be inserted;

2. after the words “bidding period” and before the symbol “.”, the words “or the tendering period” shall be inserted;

v. the exiting sub-regulation (4) shall be substituted by the following sub-regulation, namely,-

“(4) The acquirer through the Manager to the offer shall, within two working days from the closure of the bidding period or the tendering period, make a public announcement in the same newspapers in which the detailed public announcement under sub-regulation (1) of regulation 15 of these regulations was made, of the success or failure of the fixed price delisting process or the reverse book building process and also disclose the discovered price accepted by acquirer, in the event of success of the reverse book building process.”

IV. in regulation 19,

i. in the marginal heading, the words “reverse book building process” shall be substituted by the words “delisting process”;

ii. in sub-regulation (1),

a) the word “Public” shall be substituted by the words “The public”;

b) after the words “participate in the” and before the words “reverse book building process”, the words “fixed price process or in the” shall be inserted;

iii. in sub-regulation (3),

a) after the words “on the basis of” and before the words “underlying equity shares”, the word “the” shall be inserted;

b) the words “reverse book building” shall be substituted by the word “delisting”;

c) in the proviso, the words “reverse book building” shall be substituted by the word “delisting”;

v) after regulation 19, the following regulation shall be inserted, namely-

“Floor Price

19A (1) The floor price of the equity shares proposed to be delisted through reverse book building process or through fixed price process, as the case may be, shall not be less than the highest of the following:

i) volume weighted average price paid or payable for acquisitions by the acquirer along with persons acting in concert, during the 52 weeks immediately preceding the reference date;

ii) the highest price paid or payable for any acquisition by the acquirer along with persons acting in concert during the 26 weeks immediately preceding the reference date;

iii) adjusted book value (considering consolidated financials) as determined by an independent registered valuer:

iv) Provided that adjusted book value shall not be applicable in case of delisting of Public Sector Undertakings.

v) the volume weighted average market price for a period of 60 trading days immediately preceding the reference date on the stock exchange where the maximum trading volume of the equity shares is recorded, provided such shares are frequently traded;

the price determined by an independent registered valuer taking into account valuation parameters such as the book value, comparable trading multiples and any other customary valuation metrics for valuation of shares of companies in the same industry where the shares are not frequently traded.

Explanation: The adjusted book-value of the company shall be calculated as below – A+B+C+D – L, where,

‘A’ shall be the book value of all the assets (other than jewellery, artistic work, shares & securities and immovable property) in the balance sheet as reduced by any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

‘B’ shall be the price which jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer;

‘C’ shall be the fair market value of unquoted/infrequently traded shares and securities as determined considering the internationally accepted valuation methods by the registered valuer. If the shares and securities are quoted and frequently traded on any recognized stock exchange, the fair market value of such shares and securities shall be the transaction value as recorded in such stock exchange as on the valuation date;

‘D’ shall be the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property. In case immovable property is located outside India, market value of the property shall be determined by the independent registered valuer;

‘L’ shall be the book value of liabilities shown in the balance sheet, but not including the following amounts, namely:—

• the paid-up capital in respect of equity shares;

• the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;

• reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

• any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

• any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

(2) The reference date for computing the floor price shall be –

i) the date of initial public announcement made by the acquirer, if such an announcement was made before the close of market hours; or

ii) the trading day next to the date of the initial public announcement, if such an announcement was made after the close of market hours or on a non-trading day.”

VI. in regulation 20,

i. in sub-regulation (1),

a) the words and symbols “under sub-regulation (2)” shall be substituted by the words and numbers “in terms of regulation 19A of these regulations”;

b) the words and symbol “, and the Manager to the offer shall disclose the same” shall be substituted by the words “ and shall be disclosed”;

c) after the words “letter of offer” and before the symbol “.”, the words “by the Manager of the offer” shall be inserted;

ii. sub-regulations (2) and (3) shall be omitted;

iii. in sub-regulation (4), the words and symbols “sub-regulation (2)” shall be substituted by the words and numbers “regulation 19A of these regulations”;

VII. after regulation 20, the following regulation shall be inserted, namely-

“Fixed Delisting Price

20A (1) In case the acquirer has proposed delisting through fixed price process; the acquirer shall provide a fixed delisting price which shall be at least 15 percent more than the floor price calculated in terms of regulation 19A.

(2) The acquirer shall be eligible to undertake delisting through fixed price process only if the shares of the company are frequently traded.

(3) The acquirer shall be bound to accept the equity shares tendered or offered in the delisting offer, if the post-offer shareholding of the acquirer along with the shares tendered by the public shareholders reaches 90 percent at the fixed delisting price, offered by the acquirer.”

VIII. in regulation 21, in clause (a), after the words “discovered price” and before the words “or the counter offer price”, the words “or the fixed price” shall be inserted;

IX. in regulation 22,

i. in sub-regulation (3), after the words “discovered price” and before the words “is higher than”, the words “pursuant to reverse book building process” shall be inserted;

ii. the existing sub-regulations (4) and (5) shall be substituted by the following sub-regulations, namely,

“(4) In case of delisting through reverse book building process; a counter-offer may be made by the acquirer to the public shareholders, provided –

i. the post-offer shareholding of the acquirer, along with the shares tendered by public shareholders, is not less than seventy-five percent; and

ii. not less than fifty percent of the public shareholding has been tendered.

(4A) The counter-offer in terms of sub-regulation (4) may be made within two working days of the closure of the bidding period and thereafter the acquirer shall ensure compliance with the provisions of these regulations in accordance with the timelines provided in Schedule IV of these regulations.

(5) The counter offer price shall not be less than the higher of-

i. volume weighted average price of the shares tendered/offered in the reverse book building process; and

ii. the indicative price, if any, offered by the acquirer.

Explanation-If the cumulative shareholding of the acquirer, along with the shares tendered or offered by the public shareholders is less than ninety percent; the volume weighted average price shall be calculated taking into account all the shares tendered or offered and if the cumulative shareholding is equal to or higher than ninety percent, the volume weighted average price shall be calculated taking into account the shares tendered or offered up to ninety percent.”

X. in regulation 23,

i. in sub-regulation (2),

a) in clause (a),-

1. the words and symbol “tendered/offered”, shall be substituted by the words and symbols “tendered or offered under the reverse book building process or the fixed price process or the counter-offer, as the case may be,”;

2. the words “Schedule II or Schedule IV of ” shall be omitted;

3. The words “as the case may be”, appearing after the words “these regulations” and before the words and symbol “, shall be released”, shall be omitted;

4. in sub-clause (i),-

a. after the words “reverse book building process” and before the words “under sub-regulation (3) of regulation 17”, the words “or the fixed price process” shall be inserted;

b. the symbol “/” appearing between the words “tendered” and “offered” shall be substituted by the word “or”;

b) in clause (c), in sub-clause (i), after the words “reverse book building process” and before the words “under sub-regulation (3) of regulation 17”, the words and symbols “or the fixed price process, as the case may be, ” shall be inserted;

XI. in regulation 24,

i. in sub-regulation (1),

a) after the words “regulation 20 of these regulations” and before the words and symbol “, as stated in the public announcement”, the words “or fixed price offered by the acquirer in terms of sub-regulation (1) of regulation 20A of these regulations” shall be inserted;

b) in clause (i) thereof, after the words “regulation 22” and before the words “of these regulations”, the words “or in terms of fixed price as provided under regulation 20A” shall be inserted;

XII. in regulation 37, in sub-regulation (2), after clause (j), the existing Explanation shall be substituted with the following Explanation, namely,-

“Explanation —The reference date for computing the volume weighted average price would be the date on which the prior intimation is required to be given to the stock exchanges under regulation 29 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time.”

XIII. after regulation 38, the following regulation shall be inserted namely,-

“Part-E

SPECIAL PROVISIONS FOR DELISTING OF INVESTMENT HOLDING COMPANY

Delisting of equity shares of a listed investment holding company pursuant to a scheme of arrangement

38A (1) Nothing contained in these regulations shall apply to the delisting of equity shares of an investment holding company, pursuant to a scheme of arrangement by an order of a Court or Tribunal.

(2) Delisting of equity shares made under sub-regulation (1) shall be undertaken, in the following manner-

i. the listed investment holding company shall transfer the equity shares (value as calculated on a net of pro-rata liabilities) held by it in other listed companies, to its public shareholders in proportion to their shareholding;

ii. the listed investment holding company shall make payment in cash (value as calculated on a net of pro-rata liabilities) in exchange for the underlying shares or investments made by such investment holding company in unlisted companies and other assets, if any, to its public shareholders in proportion to their shareholding;

iii. public shareholding of the listed investment holding company shall be extinguished upon transfer of the underlying shares mentioned at (i) and payment in cash mentioned at (ii), pursuant to a scheme for selective reduction of capital under Section 66 of the Companies Act, 2013, as amended from time to time; and

iv. the listed investment holding company shall apply to the stock exchanges for delisting.

(3) The delisting of the equity shares of an investment holding company in terms of sub-regulation (1) shall be permitted, subject to the fulfilment of the following conditions :-

i. the listed investment holding company shall have not less than seventy-five percent of its fair value comprising direct investments in equity shares of other listed companies;

Explanation: The fair value (net of liabilities) of the listed investment holding company shall be determined pursuant to a joint report by two independent registered valuers, which, inter-alia, shall include-

a) value of investments of frequently traded shares of listed companies based on sixty trading days volume weighted average market price;

b) fair value of investments of infrequently traded shares of listed companies and unlisted companies; and

c) fair value of other assets of the listed investment holding company.

ii. the listed investment holding company shall comply with regulations 11, 37 and 94 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Circulars issued thereunder;

iii. there shall be e-voting by shareholders of such listed investment holding company wherein votes cast by public shareholders of the listed investment holding company in favour of the proposal are not less than two times the number of votes cast against it;

iv. the material disclosures in relation to calculation of the entitlement ratio and per share consideration is included in the explanatory statement of the notice for the shareholders meeting;

v. the joint valuation report obtained by two independent registered valuers shall be submitted to the stock exchanges along with draft scheme for disclosure to public;

vi. the report from a chartered accountant or merchant banker confirming the entitlement ratio is obtained;

vii. the shares of the listed investment holding company shall have been listed for not less than 3 years and shall not be suspended at the time of taking this route;

viii. no adverse orders have been passed by the Board against the listed investment holding company and their promoters or promoter group in the last three years; and

ix. the equity shares of the listed investment holding company so delisted, shall not be permitted to seek relisting for a period of three years from the date of delisting:

Provided that such relisting shall be in terms of sub-regulation (3) and (4) of regulation 40 of these regulations.

(4) The delisting of the equity shares of an investment holding company shall also be subject to the compliance with any requirement specified by any financial sector regulator with whom such investment holding company is regulated.”

BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./526/2024-25]

Footnotes:

1. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 were published in the Gazette of India on June 10, 2021 vide No. SEBI/LAD-NRO/GN/2021-25.

2. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 were subsequently amended on, –

(2) 3^rd August, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.