May 28, 2016

Small Investors to Benefit From SEBI 's Compulsory Delisting Moves


Under compulsory delisting, a stock exchange can initiate the process for delisting of a company if it has remained suspended for over 6 months and it has not taken any step to have the suspension revoked. Before any such delisting the exchange is required to offer a final opportunity to the company and shareholders need to be informed through public notices about any such step.

One set of 3,000 such companies were listed on regional exchanges but the exchanges shut down. In another set, the promoters might have vanished after duping investors. A third set of companies do not want to pay the penalties to revoke their suspension.

"Sebi can relax the rules for companies listed on regional exchanges," said the person cited above.

Over the past two years, most of the regional stock exchanges have stopped trading due to their inability to comply with Sebi norms on the minimum net worth of exchanges and meet the level of trading activity prescribed by the regulator. Sebi norms require stock exchanges to have a minimum net worth of Rs 100 crore and annual trading of Rs 1,000 crore.

Further, Sebi also allowed firms listed on regional stock exchanges to be listed on nationwide exchanges. However, many companies were unable to list on the BSE and NSE because they were unable to meet the minimum Rs 10 crore net worth required by the exchanges.

For companies listed on regional stock exchanges, delisting through reserve book-building is a cumbersome process. In reverse book building a company that wants to get off an exchange decides on the price that needs to be paid to shareholders to buy back stocks. Shareholders then bid at various prices above or equal to the floor price set by the company. The final buyback price is determined after aggregating all shareholder bids.

"Many companies listed on regional exchanges are unable to meet the migration criteria for national exchanges. Such companies should be provided an easy delisting platform," said Sandeep Parekh, founder, finsec law advisors.

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Great News for Investors of Companies like Frick India , NBI Industrial Finance , Shri Digvijay Finlease PNB Finance , etc etc

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