DELISTING OF SECURITIES

Guided by – Mr. Himal ParikhSubmitted by – Prashant Maharshi

What is Delisting???

• It is the process of removing securities of the listed companies from a stock exchange permanently.

• It is also known as the Reverse Book Building Process.

• After the completion of the delisting process, the securities of that particular company will no longer be traded on that stock exchange.

SEBI GUIDELINES FOR DELISTING

• The exit price for delisting should be in accordance with the book-building process.

• The offer price should have a floor price (a minimum base price) which will be the average of 26 weeks traded price and without a maximum price.

• Market forces will determine the price above the base price. Stock exchanges will provide the infrastructure to ensure transparency whereby investors can see the prices on screens.

• To reduce risk of price manipulation, the scrip will be under watch by the exchanges.

• Comprehensive provisions should include procedures governing the entire subject of delisting of securities of companies, and should cover cases in which companies on their own seek delisting of their securities from all or some of the stock exchanges.

WHY DELISTING IS DONE???

• The Company no longer complies with the Listing Requirements of

the Exchange.

• The Company becomes a private company.

• Trading volumes on the exchange it whishes to delist are not

sufficient to justify the listing fees.

• The company (usually the legal entity) is being liquidated.

• The company declares a Bankruptcy (for example a company can

default on paying their debt and file for bankruptcy protection).

SOME CASE STUDIES ON DELISTING

IGATE Delisting PATNI Computer Systems

• IGATE decided to delist Patni from Indian Exchanges by giving Rs. 520 per share.

• IGATE received offer for 16.2 million shares, but they had total of 26.8 million

shares.

• Total bid came for 14.3 million shares at Rs. 520 per share.

• Delisting process opening date was on 28th March, 2012.

• Floor price was fixed for buyback at Rs. 356.74 per share.

• IGATE would cost Rs. 1394 crore for the delisting of Patni.

• IGATE owns around 83% of PATNI’s share.

• If IGATE don’t goes for buyback, then its promoter’s have to bring down its

shareholding to 75%.

International Paper to Delist AP Paper

• AP Paper is the subsidiary company of US-based major International Paper. It is trading at about Rs. 306. The company’s sole promoter International Paper holds 75% equity of the AP Paper.

• The AP Paper Mills Limited has informed the Exchange for the delisting of Equity shares of the company from the Hyderabad Stock Exchange Limited.

• On Monday, shares of AP Paper Mills Limited increased to 16.44% to Rs. 307.35, up Rs. 43.40.

• As the share price is increasing rapidly, The International Paper (Owner) wants to delist AP Paper by offering sufficient amount of premium to its existing shareholders.

• AP Paper was acquired by International Paper after a buyout of promoters’ stake and open offer. This helped International Paper to become majority stakeholder.

• FII and DII’s hold 4.64% and others have 20.37% in AP Paper.

Chettinad Cement to go for Delisting

• Chettinad Cement fixed its floor price at Rs. 540.

• On Tuesday, 15-05-2012, stock touched an all time high of

Rs. 875, up by 6.7% from its previous close.

• On the same day, it ended up with Rs. 795.45 down by

3.06%.

• As on end of March, the promoters hold 88.44% of the

shares.

• The public holds 11.56% or 44.16 lakh shares.

Thank You