The Telegraph
Since 1st March, 1999
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Stage set for central listing authority
- Reverse book-building route to set delisting price; decision on demutualisation deferred

Mumbai, Nov. 9: The Securities and Exchange Board of India (Sebi) today approved the delisting panel’s recommendations to set up a central listing authority and make companies use book building route to exit from stock exchanges even as the board deferred a decision on demutualisation of bourses and expansion of derivative products.

The board decided to take up the issue of demutualisation and derivatives at its meeting slated for November 28.

“We need some more discussion on demutualisation and derivatives,” Sebi chairman G.N. Bajpai told reporters after the board meeting here.

Bajpai said the board has cleared the suggestions of the delisting panel for the formation of a central listing authority, for bringing in uniformity in due diligence for listing applications.

Bajpai added that all efforts would be made to adhere to a fixed time frame in setting up a central listing authority.

The delisting panel headed by Sebi executive director Pratip Kar had suggested that the book building route should be used to determine the exit price.

The offer price (for exit) should have a floor price—an average of 26 weeks’ traded price—and there should not be any ceiling on maximum price offered to investors, the panel had said.

Sebi’s landmark decision on reverse book building for delisting of shares will help individual shareholders get a better price from the company when it delists a share from the bourses.

There had been opposition from certain quarters on adopting the reverse book building method as it was felt that price discovery would not be efficient.

Sebi officials were in favour of adopting the takeover code for pricing delistings.

However, the board cleared the reverse book building method based on feedback from various quarters, Bajpai added.

Today’s meeting also discussed the much-debated Kania Committee recommendations on demutualisation.

The Sebi board has to approve the report before forwarding it to the finance ministry for its clearance.

On October 26 finance minister Jaswant Singh had announced at the Bombay Stock Exchange that the government would take a decision on the Kania Committee report within four weeks.

The Sebi board was to also discuss and finalise the list of securities to be added to the existing 30 securities in the derivatives segment. However, the issue was deferred, Bajpai said.

“We need more discussions before we decide on the corporatisation of stock bourses and on increasing the number of derivative products,” he explained.

The board meeting was attended by Sebi board members, K. Muniappan (RBI nominee), and Swaroop (government nominee). Vinod Dhal (another government nominee) did not turn up.

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