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. • I Power … The final offer price of shares is the price at which the maximum number of shares are tendered by public shareholders. Thus, the reasons for delisting are in part explained by the financials. Interestingly, India is the only country which has adopted the Reverse Book Building process for delisting shares of a company. 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. Experience bears out that if shareholders object to the timing of the delisting and price, they have recourse. 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. Hexaware Technologies, Adani Power and Vedanta are in the process of delisting from the pandemic-marred stock markets. 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 promoters are permitted to make a counteroffer, the delisting was called off by the acquirer. 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 COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. 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. 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. Adani Power on Tuesday sought shareholders nod for its Rs 3,264 crore delisting proposal through postal ballot. Google - Adani Power gets shareholders nod for delisting. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. In India, delisting is governed by SEBI (Delisting of Equity Shares) Regulations, 2009. Arvind Kumar Tiwari, second year student at National Law University, Delhi. 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. 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. Regulations to the Oelisting Proposal and consequent voluntary delisting of Adani Power Ltd Adani Corporate House Shantigram. Then there are strategic concerns to be able to extract private benefits (Kim and Lyn, 1991). While they have deleveraged significantly between 2017 and 2019, they also have, on average, reported net losses during the past five years. A share may be delisted from a stock exchange voluntarily or compulsorily. (Source: Freepik). 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. Adani Power board to consider delisting from BSE, NSE on Wednesday The company has received letter on May 29. 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. 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. Other lenders would also approve. 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. Over the years there have been delistings in India for each of the these reasons. 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. 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. Reverse Book Building process is complicated and it requires all the stakeholders to have a high level of information and knowledge. Adani Power on Friday said it has received shareholders' approval for its Rs 3,264-crore delisting proposal. The public shareholders start entering their bids in the bidding period during this process. So one may ask why companies voluntarily delist. Over the last decade, the two companies have demonstrated volatility in their debt to equity ratio. 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. Proudly created with Wix.com, Reverse Book Building Process in the Delisting Regulations - A Critique. The contingent price mechanism is yet another way go about delisting which sufficiently preserves the interest of minority shareholders. Further, Vedanta witnessed a significant increase in the dividend payout while Adani power declared no dividend. 8.21 PM Dec 11th . 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 … The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team. It is observed in the past that minority shareholders have collectively exercised each of these options thus materially affecting the delisting process. 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. 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. com Registered Office: Shikhar, Nr Mithakhali Six Roads, Navrangpura, Ahmedabad - 380 009, Gujarat, India. 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. 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. Then there are reasons such an inability to take advantage of the stock market. 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. Adani Power rose 1.57percent to Rs 35.55 after the company received approval from its shareholders for its delisting proposal. 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. Karnataka origin Dr Vivek Murthy to head Covid task force under Biden Parties on edge as many Bihar seats to … 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. and the procedure for the same is spelt out in Schedule II of SEBI Delisting Regulations. This may be correlated with the Insolvency and Bankruptcy Code and the clampdown on shell companies, whereas voluntary delistings include those exclusively from NSE. Join our, Promoter Opportunism Vs Minority Protection. The offer price is determined through the. In a major development, Adani Power board on Monday approved the proposal to delist the company's equity shares from stock exchanges. Another important consideration for a listed company is dividend payout. The COVID-19 has created an environment of unpredictability and perturbing volatility which has adversely impacted stock trading. 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. 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. Shares of Adani Power on the BSE on Friday closed at Rs 36.40, higher by 0.97 per cent from its previous close. 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. Adani Power sought shareholders nod for its Rs 3,264 crore delisting proposal through postal ballot. rrb/sn/vd 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. India Matters. Such arbitrageurs purchase shares about to be delisted to influence the final price in a manner which profits themselves. 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. The counter-offer is required to be accepted by the promoters to successfully conclude the delisting process. In each of these cases, shareholders must act in consonance. 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. 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. Various reasons have been ascribed internationally. Kindly follow our Code of Conduct and refrain from posting any abusive, promotional or gibberish content on forum. 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 promoters have the choice to accept such final price or to decline the offer and must then follow due process indicating failure of delisting. 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. 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. –IANS. In early June, Hexaware Technologies announced a voluntary delisting proposal as well, that its board will consider. 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. Adani power delisting Adani power share delisting. Adani Power promoters intend to buyback all shares of the company and delist it from the bourses. 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