MUMBAI: The Securities and Exchange Board of India (SEBI) on Thursday came out with an alternative mechanism for determining the price to be offered by promoters of delisting firms to shareholders. In its revised draft regulations, SEBI said the offer price should not be less than the floor price plus 25 per cent premium, or the fair price plus 25 per cent premium, whichever is higher.

The floor price would be determined by high and low of closing prices of securities and other parameters such as return on net worth, while the fair price would be ascertained by accredited credit rating agencies.

While suggesting the alternative mechanism, the draft regulations proposed to do away with the current book-building method for arriving at the offer price. This has been suggested as the book-building method was not fully achieving the objective of determining a fair exit value for the shareholders.

SEBI also suggested that delisting from bourses would not be allowed if the stake of promoters (together with persons in concert) was not likely to increase above 90 per cent even after tendering of shares.

In case the company concerned has a minimum public shareholding level of ten per cent under the listing agreement, the promoters' stake has to go up above 96 per cent after tendering of shares by shareholders. Such requirements are not there in the existing guidelines.

The revised draft norms also suggested converting guidelines for delisting of shares into regulations to give them legal sanctions.

SEBI has sought public comments on the draft regulations by December 14.

The draft says the floor price of shares concerned should not be less than the average of the weekly high and low of the closing prices of the securities of the company on stock exchanges where the shares are frequently traded.

In the case of bourses where the securities are most frequently traded, the floor price should not be less than high and low of closing prices of 26 weeks or two weeks preceding the date on which the stock exchanges were notified of the board meeting in which the delisting proposal was considered.

The floor price should also be dependent on other parameters like return on networth, book value of shares, earnings per share, price earning multiple vis-a-vis the industry average. — PTI

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