Market regulator SEBI has ruled out any re-look on the recently announced delisting norms while refuting industry arguments that new regulations would “kill the delisting” activity in India,

On the contrary, the newly announced delisting norms will incentivise and force promoters to make a very honest attempt to reach out to shareholders, said SEBI Chairman U.K Sinha.

“I am sure if they (promoters) do that (reach out to all shareholders), some of the delisting efforts will succeed”, Sinha told reporters after inaugurating BSE’s new investor service centre in the capital on Saturday.

Sinha pointed out that there have been instances where only two shareholders have been able to tender the shareholding and the delisting had succeeded.

“I think it is a fraud. If you have hundreds and thousands of shareholders and two of them come together and shares get delisted, it is definitely against the interest of the vast majority, super majority of shareholders. It was a defect in our regulation and we strongly believed this needed to be corrected”, Sinha said.

SEBI was worried that people were not reaching out to investors, he said.

“Is it the argument being made from the other side (those against the new delisting norms) that even if 99 percent of the shareholders are not tendering (not ready), the delisting should happen. I am sure if you apply your mind, you will find that this is not a correct demand”

The recently announced delisting norms among other conditions stipulated that a delisting would be considered successful only if 25 per cent of the number of public shareholders—holding shares in dematerialised form—tender in the reverse book building process.

This condition on 25 per cent of the number of public shareholders (holding shares in dematerialised form) is being considered as stringent by some analysts and they contend it could kill the whole delisting process.

However, Sinha felt that 25 per cent norm was justified and pointed out that it was a qualified in the sense that only shareholders who held shares in dematerialised form would be considered.

SEBI Chief also highlighted that the new delisting norms have corrected the price fixation mechanism, which were defective.

“In the earlier situation, any price at which maximum number of shares was tendered-- that became the reverse book building price. Now you go from the lowest price and the price at which cumulatively 90 per cent of the shares are reached that becomes the price. It is now very democratic”.

>srivats.kr@thehindu.co.in