Voluntary Delisting -Strategy


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Voluntary Delisting -Strategy

  1. 1. Voluntary Delisting - Strategy Corporate Professionals Ideas for Today and Tomorrow
  2. 2. What Listing provides? <ul><li>Listing provides: </li></ul><ul><li>Ready marketability of shares – Trading platform </li></ul><ul><li>Free negotiability </li></ul><ul><li>Liquidity </li></ul><ul><li>Supervision and control by the Regulator </li></ul><ul><li>Market image </li></ul><ul><li>Economic indicator </li></ul>
  3. 3. Cost v. Advantage <ul><li>Is the listing in Regional Stock Exchange proving beneficial to your shareholders? </li></ul><ul><li>Consider the amount of trades in your shares taking place on a Regional Stock Exchange. </li></ul><ul><li>Is the cost of compliance worth the advantage accruing to your Company and the shareholders? </li></ul><ul><li>Thinking? Confused? Move on… </li></ul>
  4. 4. Consider Delisting <ul><li>Total control; </li></ul><ul><li>Regulatory Demands; </li></ul><ul><li>Get rid of multiple exchange compliance; </li></ul><ul><li>Ease of financial budget, wiping off un-necessary cost of annual listing fee; </li></ul><ul><li>Reduction in threats of Takeovers and Acquisitions; </li></ul><ul><li>Better track of shareholders at one platform; </li></ul><ul><li>Are not the benefits worth considering delisting? </li></ul>
  5. 5. Annual cost of Listing saved <ul><li>Annual cost of listing on Stock Exchanges Rs. 75,000.00 </li></ul><ul><li>  </li></ul><ul><li>Annual Compliance Expenses (Certifications, etc.) Rs. 25,000.00 </li></ul><ul><li>  </li></ul><ul><li>Cost of man-days spent of compliances </li></ul><ul><li>(12 months x Rs. 5 000/ man-day) Rs. 6 0 ,000.00 </li></ul><ul><li>  </li></ul><ul><li>Cost of R & T Agents Rs. 50,000.00 </li></ul><ul><li>  </li></ul><ul><li>Cost of holding AGM Rs.100,000.00 </li></ul><ul><li>  </li></ul><ul><li>Cost of Annual Report printing Rs. 50,000.00 </li></ul><ul><li>  </li></ul><ul><li>Other misc. costs Rs. 10,000.00 </li></ul><ul><li>  Total Costs Around Rs. 350,000/- </li></ul><ul><li>  * Approximate figures </li></ul>
  6. 6. <ul><li>Companies who are listed on any Stock Exchange having nationwide terminals viz. NSE & BSE, may get their shares delisted from any or all regional stock exchanges. </li></ul><ul><li>The erstwhile compulsion of being listed on the regional stock exchange where the regd. office of the Company is situated has also been done away with. </li></ul><ul><li>The only requirement is to get the approval of shareholders through a special resolution and apply to the Stock Exchange. </li></ul>SEBI (Delisting) Guidelines, 2003
  7. 7. <ul><li>Companies who wish to delist from all stock exchanges need to follow the under mentioned simplified procedure: </li></ul><ul><li>Special resolution in General Meeting </li></ul><ul><li>Appointment of Merchant Banker </li></ul><ul><li>Public Announcement for exit option to shareholders through reverse Book-building </li></ul><ul><li>Completion of Exit option </li></ul><ul><li>Application to the concerned Stock Exchanges for Delisting </li></ul><ul><li>Compliance with additional conditions as may be specified by concerned stock exchange </li></ul><ul><li>Six months period to be given to remaining shareholders to tender shares at same price </li></ul>SEBI (Delisting) Guidelines, 2003
  8. 8. Time line
  9. 9. Floor & Exit Price <ul><li>Acquirer to announce floor price i.e. avg. of 26 weeks traded price quoted on SE where shares are most frequently traded, </li></ul><ul><li>Exit Price to be determined through Book Building Process </li></ul><ul><li>Exit price to be determined as the price at which maximum no. of shares offered </li></ul><ul><li>All offers upto final price to be accepted </li></ul>
  10. 10. Book Building Process <ul><li>Acquirer to deposit 100% of estimated consideration in Escrow a/c in form of Cash/ Bank guarantee/Acceptable securities or combination </li></ul><ul><li>Shareholders have rights to revise bids </li></ul><ul><li>Appoint trading members for placing bids on the on-line electronic system in minimum of 30 SE centers </li></ul><ul><ul><li>Book displayed at trading terminals </li></ul></ul><ul><li>Shareholders shall deposit shares with trading members or may mark a pledge in their favour </li></ul><ul><li>Trading Members to pay shareholders on final settlement </li></ul>
  11. 11. Offer Failure <ul><li>Acquirer rejects exit price </li></ul><ul><li>Acceptance does not result in public shareholding falling below minimum limit </li></ul><ul><li>Implications </li></ul><ul><ul><li>No securities shall be acquired through the offer </li></ul></ul><ul><ul><li>Securities continue to be listed </li></ul></ul><ul><ul><li>Public shareholding to be brought up to the minimum limit within period of 6 months through issue of fresh shares, offer for sale & secondary market dilution </li></ul></ul><ul><li>Beyond 6 months, promoter to make offer for sale to public at price determined by Central Listing Authority (CLA) </li></ul>
  12. 12. Issues involved <ul><li>Cost of NSE/ BSE for providing infrastructure for online book-building is very high. </li></ul><ul><li>Being an expensive process, till date only one company opted for total delisting route. (Hewlett Packard acquired shares of Digital Globalsoft for public shareholders in order to get it delisted) </li></ul><ul><li>Book-building process only for demat shares; shareholders with physical holdings have no say in price discovery </li></ul><ul><li>Doctrine of Unjust enrichment applies to Delisting: Promoters used public money in initial stages of growth and showing them way back when Company grows larger. </li></ul>
  13. 13. Thank You