On Monday, Adani Power shares surged 10% as Gautam Adani declared that he plans to delist his group's power utility, Adani Power close on the heels of Anil Agarwal announcing the delisting plans of Vedanta Ltd. Adani Power promoters intend to buy back all shares of the company and delist it from the bourses. The promoters have the choice to accept such final price or to decline the offer and must then follow due process indicating failure of delisting. 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. Considering the loopholes in the current delisting procedure, there seems to be an emerging need to revamp the existing delisting mechanism and replace the complex reverse book building process to fix the final offer price. I find that, on average, companies were either making higher losses or reporting lower profits before their delisting and report better financials after delisting. Marosi and Massoud (2007) find that firms with fewer valuable growth opportunities, higher leverage, and lower market momentum tend to go dark. However, it failed to delist due to the lack of shareholders’ response. This would also be a more efficient way to go about delisting and it safeguards shareholders’ interest as well. This goes up incrementally with the share capital. The final offer price of shares is the price at which the maximum number of shares are tendered by public shareholders. Experience bears out that if shareholders object to the timing of the delisting and price, they have recourse. 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. Here, shareholders have exercised the options available to stall delisting. 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. Adani Power declined over 3% to Rs 38.70, while Adani Port fell 2% to Rs 333.35 on Thursday. Then a floor price is fixed as per Regulation 15 of Delisting Regulations and, In 2018, Securities and Exchange Board of India enforced, like Vedanta, Adani Power and Hexaware Technologies, July 2018 Discussion Paper on Delisting Regulations, SEBI (Delisting of Equity Shares) (Second Amendment) Regulations, 2018. This method could help in nullifying the adverse effect of the promoters’ opportunistic behaviour as the public shareholders can enjoy proportionate benefits if the value of the company rises significantly as a result of delisting. However, if the promoters accept the final offer price they must accept all shares tendered at the bid price, i.e. Adani Power sought shareholders nod for its Rs 3,264 crore delisting proposal through postal ballot. 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. 8.21 PM Dec 11th . SEBI (Delisting of Equity Shares) Regulations, 2009, mandate that a company seeking to delist its shares from one or more recognised stock exchange having nationwide terminals, is required to provide an exit opportunity to all its public shareholders. Usually, public shareholders are not as well-versed with the intricacies of this process as promoters and this information asymmetry shrinks the prospect of appropriate price discovery. The COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. Although the promoters are permitted to make a counteroffer, the delisting was called off by the acquirer. India Matters. UTV Software is an example of a company whose stocks got voluntarily delisted after Disney acquired the company. Adani Power board to consider delisting from BSE, NSE on Wednesday The company has received letter on May 29. Consequently, a number of companies, like Vedanta, Adani Power and Hexaware Technologies, have triggered the process of voluntary delisting. Adani Power on Friday said it has received shareholders' approval for its Rs 3,264-crore delisting proposal. 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. The offer price is determined through the Reverse Book Building process and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. 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. ©2019 by The Securities Blawg. Suranjali Tandon is Assistant Professor at the National Institute of Public Finance and Policy. The SEBI’s July 2018 Discussion Paper on Delisting Regulations has acknowledged these concerns and further pointed out that even promoters may indulge in unscrupulous behaviour by selling stakes to “friendly shareholders” who would then bid at a price level which unduly favours the promoters in the reverse book building process. Adani Power promoters intend to buyback all shares of the company and delist it from the bourses. A share may be delisted from a stock exchange voluntarily or compulsorily. Companies tend to delist during the times of economic slump based on the justification that the share price does not correctly reflect the true worth of the company. Bloomberg | Quint is a multiplatform, Indian business and financial news company. If accepted, the merchant banker shall announce the final price and the promoter’s acceptance. Can anyone tell? 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. Therefore, it can be said that there is evidence that companies delist for reasons such as leverage that, in fact, increases further after delisting and for the need to plough back profits. 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. 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. Over the years there have been delistings in India for each of the these reasons. Regulations to the Oelisting Proposal and consequent voluntary delisting of Adani Power Ltd Adani Corporate House Shantigram. Below is the timeline on how the process will play out. Post. (Source: Freepik). Post. 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. First, the annual listing cost in India starts at Rs 2.5 lakh on the BSE and Rs 2.9 lakh on the NSE for companies with paid-up capital of up to Rs 100 crore. “We have received approval from close to six lenders. 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. Adani power delisting Adani power share delisting. Interestingly, proxy advisors recommended to shareholders that they do not tender their shares since a growth in revenue was expected. The company has announced the floor price of a share at Rs 33.82 to buy 96.53 crore shares with the public for about Rs 3,264 crore. 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. As per delisting regulations, the promoter is required to nominate a Merchant Banker and a Trading Member to carry out this process. That said, there are concerns that promoters may wish to profit by delisting, particularly during a bad phase in the market. It is possible that such pressure may have resulted in a significant difference between the floor price of Rs 93.66 versus a final offer price of Rs 133. Google - Adani Power gets shareholders nod for delisting. 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. "Meeting of board of directors of Adani Power to be held on June 3, 2020 to consider the proposal for voluntary delisting of the equity shares of the company received from Adani Properties and related matters incidental thereto," the company said in a regulatory filing. The minority shareholders bid a price nearly twice over the quoted price. The COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. Another important consideration for a listed company is dividend payout. We combine Bloomberg’s global leadership in business and financial news and data, with Quintillion Media’s deep expertise in the Indian market and digital news delivery, to provide high quality business news, insights and trends for India’s sophisticated audiences. A compulsory delisting is the result of a breach which could entail not meeting the necessary disclosure requirements. 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. This may be correlated with the Insolvency and Bankruptcy Code and the clampdown on shell companies, whereas voluntary delistings include those exclusively from NSE. –IANS. Stock trading is occurring at multi-year lows for several industries due to which other companies may also resort to voluntary delisting. The contingent price mechanism is yet another way go about delisting which sufficiently preserves the interest of minority shareholders. Then there are reasons such an inability to take advantage of the stock market. Adani Power had announced for voluntary delisting last month and had already received the board of directors approval for the same. Then a floor price is fixed as per Regulation 15 of Delisting Regulations and the Reverse Book Building process commences after the fixation of the floor price. The promoters may also announce delisting at a point in time when the market price of the shares is significantly lower than the actual value of the company and ultimately take undue advantage of the minority shareholders. Adani Power rose 1.57percent to Rs 35.55 after the company received approval from its shareholders for its delisting proposal. Adani Power surged 7.69percent to Rs 39.20 after the company said its board will meet on 3 June 2020 to consider a proposal to delist equity shares from the domestic stock exchanges. S G Highway Ahmedabad 382 421 Gujarat India CIN: L40100GJ1996PLC030533 Tel +91 79 2656 7555 Fax +91 79 25557177 info@adani.com www.adani. and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. And when is reverse book building process for delisting will begin? rrb/sn/vd 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. However, the promoter may also fix a higher final price and make a counter-offer. Missing BloombergQuint's WhatsApp service? 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. 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. It is observed in the past that minority shareholders have collectively exercised each of these options thus materially affecting the delisting process. 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. com Registered Office: Shikhar, Nr Mithakhali Six Roads, Navrangpura, Ahmedabad - 380 009, Gujarat, India. 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. In 2018, Securities and Exchange Board of India enforced SEBI (Delisting of Equity Shares) (Second Amendment) Regulations, 2018 pursuant to the aforementioned Discussion Paper and it added a provision which allowed the public shareholders to make a counteroffer if they are not satisfied with the price discovered in Reverse Book Building Process. A compulsory delisting is the result of a breach which could entail not meeting the necessary disclosure requirements. The process of reverse book building is initiated and public shareholders may submit their bids along with shares. 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 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. Other lenders would also approve. As per the guidelines prescribed by SEBI, in case of a voluntary delisting of shares, the company has to follow the below process: Company will call for a board meeting after giving written notice to all board members. In each of these cases, shareholders must act in consonance. 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. Therefore, the costs would be a reason for illiquid companies. To understand if this factor is at play, I estimate the debt to equity, profitability ratio, and dividend payout ratio of 72 companies that delisted from NSE between 2002 and 2019. Anil Sardana, managing director and CEO, Adani Transmission ltd and MD-thermal at Adani Power in a media call on Thursday said the deslisting process of Adani Power is in process. A wave of voluntary delisting proposals in the country's $1.8-trillion stock market is stoking bets on which entity will be the next to go private. Join our, Promoter Opportunism Vs Minority Protection. An exit sign hangs in an office. The COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. 7.40 AM Dec 29th. “Big investors who were holding the shares on margin funding must have sold the Adani group shares as the process of re-listing with restructured equity may take time,” said Rikesh Parikh, VP-markets strategy and equities, Motilal Oswal Financial Services. The company enjoys the right to accept/reject the offer price. Hexaware Technologies, Adani Power and Vedanta are in the process of delisting from the pandemic-marred stock markets. There may be other causes such as the cost of staying public are no longer outweighed by the benefit (Bharath and Dittmar, 2010). Karnataka origin Dr Vivek Murthy to head Covid task force under Biden Parties on edge as many Bihar seats to … So one may ask why companies voluntarily delist. Interestingly, India is the only country which has adopted the Reverse Book Building process for delisting shares of a company. 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 early June, Hexaware Technologies announced a voluntary delisting proposal as well, that its board will consider. 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. While they have deleveraged significantly between 2017 and 2019, they also have, on average, reported net losses during the past five years. In the last 12 months, Adani Power’s share price has halved from a high of ₹ 73.75 to the current level of ₹ 36.40, making delisting by the promoter group an attractive and affordable option. 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. The delisting process commences when the company makes a public announcement about delisting following which, it must send a letter of offer and bidding form to the public shareholders. For example, in 2019 Linde India sought to delist its shares. If shareholders object to the timing of delisting … 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 … 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. Various reasons have been ascribed internationally. final offer price or a bid lower. Further, Vedanta witnessed a significant increase in the dividend payout while Adani power declared no dividend. 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. We are likely to conclude delisting by December or till the end of this financial year,” Sardana said responding to a query. We take the quality of the messages posted on forum as seriously as our articles. In a major development, Adani Power board on Monday approved the proposal to delist the company's equity shares from stock exchanges. It is shocking that the promoters are now (in June 2020 in the midst of the COVID-19 pandemic) proposing delisting of the shares of Adani Power at a time when the share price is languishing at around Rs.38 per share. Then there are strategic concerns to be able to extract private benefits (Kim and Lyn, 1991). Adani Power surged 7.69% to Rs 39.20 after the company said its board will meet on 3 June 2020 to consider a proposal to delist equity shares from the domestic stock exchanges. Reverse Book Building process is complicated and it requires all the stakeholders to have a high level of information and knowledge. 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. • I Power … Shareholders may value a company based on the dividend declared, given that most of these companies display poor profitability and high leverage, dividends may be a costly use of their cash. Arvind Kumar Tiwari, second year student at National Law University, Delhi. The offer price is determined through the. Interestingly, India is the only country which has adopted the Reverse Book Building process for delisting shares of a company. 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 %. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. The same result holds if a smaller set of companies reporting information throughout the period of the analysis is taken. The public shareholders start entering their bids in the bidding period during this process. Another interesting case is that of Essar Ports, earlier merged with Essar Shipping, that sought to delist on the grounds that the promoters were looking to consolidate. Adani Power on Tuesday sought shareholders nod for its Rs 3,264 crore delisting proposal through postal ballot. In India, delisting is governed by SEBI (Delisting of Equity Shares) Regulations, 2009. Consequently, a number of companies, SEBI (Delisting of Equity Shares) Regulations, 2009, Companies tend to delist during the times of economic slump based on the justification that the share price does not correctly reflect the true worth of the company. For the delisting to go through it is necessary the shareholding of the promoters should be 90% of the share capital or the aggregate of pre-offer promoter shareholding plus fifty percent of the offer size, whichever is higher. Over the last decade, the two companies have demonstrated volatility in their debt to equity ratio. 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. We take the quality of the messages posted on forum as seriously as our articles. Step 1: Vedanta Limited will seek shareholders’ approval for the delisting proposal by way of a special resolution through postal ballot and e-voting (This can typically take 4-5 weeks). Thus, the reasons for delisting are in part explained by the financials. The Adani Group’s power arm, Adani Power has announced the appointment of Vivro Financial Services as the merchant banker to evaluate its proposal of delisting its equity shares from BSE and NSE. 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. Such arbitrageurs purchase shares about to be delisted to influence the final price in a manner which profits themselves. Proudly created with Wix.com, Reverse Book Building Process in the Delisting Regulations - A Critique. 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. 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. A share may be delisted from a stock exchange voluntarily or compulsorily. 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. The counter-offer is required to be accepted by the promoters to successfully conclude the delisting process. The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team. Investors have lost more than 60% since the IPO price of Rs.100 per share without taking into account the time value of money over the last 11 years and will never have the … In late March, the stock prices of the two companies were at the lowest since 2016. The opinions expressed herein are those of the author in their personal capacity and are not intended to be construed as legal, financial or investment advice. Shares of Adani Power on the BSE on Friday closed at Rs 36.40, higher by 0.97 per cent from its previous close. 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.
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