Pour and Lasfer (2015) find that companies delisting from the London Stock Exchange’s Alternative Investment Market do so since they were unable to raise funding so their inside ownership and leverage remained high. In India, delisting is governed by SEBI (Delisting of Equity Shares) Regulations, 2009. Adani Power Ltd on Monday gave the final nod to its voluntarily delisting of equity shares at Rs 33.82 which is 10 per cent less than its previous closing of Rs 38 on Friday. Google - Adani Power gets shareholders nod for delisting. The company enjoys the right to accept/reject the offer price. For frequently-traded shares, this price is fixed at either the average of the weekly high and low of the closing prices during the past 26 weeks or two weeks prior to notifying the recognised stock exchange of the aforementioned resolution, whichever is higher. S G Highway Ahmedabad 382 421 Gujarat India CIN: L40100GJ1996PLC030533 Tel +91 79 2656 7555 Fax +91 79 25557177 [email protected] www.adani. I find that, on average, companies were either making higher losses or reporting lower profits before their delisting and report better financials after delisting. The Company has informed that after the receipt of the due diligence report from the merchant banker, the board will again meet to discuss the delisting proposal in detail. SEBI should consider the possibility of making book value the benchmark to determine floor price at the time of the original offer as it allows a more reasonable and fair price discovery at the initial stage itself. Announcements made in the month of May by Vedanta and Adani Power livened the debate on whether delisting the stock at a time of distress in asset markets can extend an undue advantage to the promoters. For example, in 2019 Linde India sought to delist its shares. Reverse Book Building process is complicated and it requires all the stakeholders to have a high level of information and knowledge. Any remaining shareholders may tender shares to the company at the final price within one year from the date of delisting according to Regulation 21. Post. Indian scenario in this regard presents an irony, the market price which does not reflect the true worth of the company becomes the yardstick to determine the offer price at which the company buys back shares from public shareholders. Although the answers are to be examined on a case to case basis, it is possible to evaluate if each of these has influenced the decision to delist in India. I find that companies that were paying dividends prior to delisting cut these by more than half after delisting, thus using reserves for financial purposes. Thus, the reasons for delisting are in part explained by the financials. The COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. The process of reverse book building is initiated and public shareholders may submit their bids along with shares. Mumbai: Billionaire Gautam Adani plans to delist his group’s power utility, Adani Power NSE 0.70 % close on the heels of Anil Agarwal announcing the delisting plans of Vedanta Ltd. NSE -0.62 %. In early June, Hexaware Technologies announced a voluntary delisting proposal as well, that its board will consider. It is possible that some of the companies whose shares do not trade substantial volumes may prefer to delist and may also do so from NSE, although it is the platform where a bulk of the transactions take place, given the costs are higher. In the last two months, the majority owners of Vedanta, Adani Power, and Hexaware Technologies have proposed buying out all publicly traded shares amid the coronavirus-induced sell-off in stocks. These aforementioned documents are to be filed without delay with the concerned stock exchange and such stock exchange shall update its website to inform the shareholders about the commencement of the delisting process. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. Shareholders willing to exercise this option must make their counter offer within two working days from the discovery of price and such price must be more than the book value of the company. Furthermore, a floor price is fixed to carry out reverse book building but no price ceiling is prescribed and the final price is completely dependent upon the wisdom of the public shareholders. Given the regulation, it is expected that the floor price for a delisting may be fixed at a price prevailing during the past 26 weeks, which may be higher than the current price. We take the quality of the messages posted on forum as seriously as our articles. Therefore, the costs would be a reason for illiquid companies. Arvind Kumar Tiwari, second year student at National Law University, Delhi. Although the promoters are permitted to make a counteroffer, the delisting was called off by the acquirer. This goes up incrementally with the share capital. However, if the promoters accept the final offer price they must accept all shares tendered at the bid price, i.e. Karnataka origin Dr Vivek Murthy to head Covid task force under Biden Parties on edge as many Bihar seats to … Another issue with this process is that it does not consider book value during computation of floor price and this may lead to share being delisted at a price which is substantially lower than the book value of the company. Interestingly, India is the only country which has adopted the Reverse Book Building process for delisting shares of a company. We are likely to conclude delisting by December or till the end of this financial year,” Sardana said responding to a query. Adani Power issued a notice for voluntary delisting of equity shares of the company from BSE Limited and National Stock Exchange of India Limited, a regulatory filing stated.The board of Adani Power had approved the proposal to delist company shares from stock exchanges on Monday. In the wake of COVID-19, more companies are expected to delist and this is a time to evaluate how effective the existing delisting regulations are to smoothly conclude a delisting transaction. For example, a company with share capital between Rs 400 crore and Rs 500 crore has to pay annual fees of Rs 6 lakh and Rs 7.3 lakh to BSE and NSE respectively. Here, shareholders have exercised the options available to stall delisting. Taking the dataset for delisting reported by NSE between 2002 and 2020 it is observed that delistings—compulsory and on liquidation—increased manifold in 2016. Interestingly, proxy advisors recommended to shareholders that they do not tender their shares since a growth in revenue was expected. Shareholders wary of any opportunistic behaviour by the promoter may vote against the resolution, bid a higher price, or may not renounce their shares in response to such ab offer. In addition to the approval by the board of directors, a special resolution must be passed after at least twice as many public shareholders agree to the delisting as those that disagree, based on the explanatory statement provided to the shareholders, and a floor price must be fixed at which the shares will be acquired. Join our, Promoter Opportunism Vs Minority Protection. A compulsory delisting is the result of a breach which could entail not meeting the necessary disclosure requirements. –IANS. However, it failed to delist due to the lack of shareholders’ response. Adani Power’s Board will meet on June 3, to consider the proposal for voluntary delisting of the equity shares of the Company received from Adani Properties Private Limited, the company said. This opens up the possibility of bids being entered at a price level which the company may not find acceptable and accordingly, it may reject the offer price, leaving the shares listed. Another important consideration for a listed company is dividend payout. Another factor which can potentially discourage the promoter from undertaking the delisting process is opportunistic behaviour by arbitrageurs who may manipulate price discovery by deliberately entering bids at a level which is not in the interest of various stakeholders in the delisting process. Stock trading is occurring at multi-year lows for several industries due to which other companies may also resort to voluntary delisting. The public shareholders start entering their bids in the bidding period during this process. and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. Interestingly, India is the only country which has adopted the Reverse Book Building process for delisting shares of a company. So one may ask why companies voluntarily delist. In the United States, companies registered with the Securities and Exchange Commission often choose to delist to go dark, so as to avoid regulatory compliance. Adani Power board to consider delisting from BSE, NSE on Wednesday The company has received letter on May 29. MUMBAI: Investors in Adani Power are a disappointed lot as the company's board on Monday set the floor price for delisting of shares at ₹ 33.82 apiece, nearly 11% below the market price. rrb/sn/vd This may be correlated with the Insolvency and Bankruptcy Code and the clampdown on shell companies, whereas voluntary delistings include those exclusively from NSE. Hexaware Technologies, Adani Power and Vedanta are in the process of delisting from the pandemic-marred stock markets. An exit sign hangs in an office. The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team. Voluntary delistings on the other hand are driven by economic and financial considerations such as costs of keeping the stock listed, the cost of complying with disclosure rules, or simply that the benefits of being listed have not accrued to the company. final offer price or a bid lower. Adani Power declined over 3% to Rs 38.70, while Adani Port fell 2% to Rs 333.35 on Thursday. Adani Power had announced for voluntary delisting last month and had already received the board of directors approval for the same. At a cursory glance, these regulations may seem good as the public shareholders enjoy the power to decide upon the final offer price in the delisting process but this mechanism is prone to certain inadequacies. The minority shareholders bid a price nearly twice over the quoted price. Further, Vedanta witnessed a significant increase in the dividend payout while Adani power declared no dividend. (Source: Freepik). Adani Power board on Wednesday appointed merchant banker Vivro Financial Services Pvt Ltd to evaluate the proposal to delist its equity shares from BSE and … As per delisting regulations, the promoter is required to nominate a Merchant Banker and a Trading Member to carry out this process. Adani Power share price gained nearly 10% today after the firm said it would consider delisting of its stock from the bourses during its board meeting scheduled on Wednesday. This would also be a more efficient way to go about delisting and it safeguards shareholders’ interest as well. A compulsory delisting is the result of a breach which could entail not meeting the necessary disclosure requirements. After the bids are audited, the final offer price is determined, which is the price at which the maximum number of public shareholders have offered shares to the promoters. However, the promoter may also fix a higher final price and make a counter-offer. Shares of Adani Power on the BSE on Friday closed at Rs 36.40, higher by 0.97 per cent from its previous close. Marosi and Massoud (2007) find that firms with fewer valuable growth opportunities, higher leverage, and lower market momentum tend to go dark. The Adani Power board on June 3 will also discuss the appointment of a merchant banker registered with SEBI for carrying out due diligence as required in terms of Regulation 8(1A)(ii) of the SEBI Delisting Regulations. 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