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UNDERSTANDING THE
CONCEPT OF DELISTING AS
AN INVESTMENT
OPPORTUNITY
Submitted by:
Rohit Jain
S.S. College of Business Studies
University of Delhi
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DECLARATION
I hereby declare that the project work titled Convertible Arbitrage: An
Investment Opportunity submitted as a specialization project, is my original
piece of work.
References to previous works in this area and guidelines have been credited to
the respective persons. No part of this project report has been submitted to any
institution or journal.
Date of Submission: April 15, 2011
Submitted to: Shaheed Sukhdev College of Business Studies, University of Delhi
Declarer:
Rohit Jain
BBS 3FB
College Roll No. : 4895
Examination Roll No. : 80096
Batch 2008-2011
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ACKNOWLEDGMENT
We would like to express our deep sense of intellectual debt to our mentor and teacher
Dr. Rohini Singh, who provided valuable comments and suggestions from time to time
as to methodology, style, and substance. Without her help, guidance and
encouragement, the making of this project would not have been possible.
We are also indebted to the whole lot of people especially our families and friends who
advised us on certain aspects, and also the people who are maintaining and updating
the various web-sites and reports which have been a great source of information.
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TABLE OF CONTENTS
SECTION 1: LITERATURE REVIEW..................................................................................................................... 6
Meaning of delisting ..................................................................................................................................... 6
Different scenarios under which delisting takes place ................................................................................. 6
o Voluntary delisting .................................................................................................................................... 6
o Compulsory delisting ................................................................................................................................ 7
SECTION 2: PROCEDURE OF DELISTING AND THE REGULATIONS GOVERNING IT ...................................... 8
Voluntary delisting ........................................................................................................................................ 8
o Delisting from one or all the exchanges ................................................................................................... 8
o When no exit opportunity is required ...................................................................................................... 8
o When exit opportunity is required ........................................................................................................... 9
o Exit opportunity ........................................................................................................................................ 9
o Indicative Timeline for the whole process ............................................................................................. 16
Compulsory delisting .................................................................................................................................. 18
o Criteria for compulsory delisting ............................................................................................................ 18
o Delisting by a stock exchange ................................................................................................................. 19
o Rights of public shareholders in case of compulsory delisting: .............................................................. 20
o Consequences of compulsory delisting .................................................................................................. 20
SECTION 3: CASE STUDIES.............................................................................................................................. 21
RayBan Sun Optics ...................................................................................................................................... 21
o Overview of events ................................................................................................................................. 21
o Event timeline ......................................................................................................................................... 22
o Share Price movement ........................................................................................................................... 22
Bosch chassis systems ................................................................................................................................ 23
o Overview of events ................................................................................................................................. 23
o Event timeline ......................................................................................................................................... 23
o Share price movement ........................................................................................................................... 24
Panasonic AVC Networks ............................................................................................................................ 25
o Overview of events ................................................................................................................................. 25
o Event timeline ......................................................................................................................................... 25
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o Share price movement ........................................................................................................................... 26
SECTION 4: CONCLUSION............................................................................................................................... 27
Bibliography .................................................................................................................................................... 29
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SECTION 1: LITERATURE REVIEW
MEANING OF DELISTING
Delisting refers to the practice of removing the stock of a company from a stock exchange so that
investors can no longer trade shares of the stock on that exchange. This typically occurs when a
company goes out of business, declares bankruptcy, no longer satisfies the listing rules of stock
exchange, or has become a private company after a merger or acquisition, or wants to reduce
regulatory reporting complexities and overhead, or if the stock volumes on the exchange from which
it wishes to delist are not significant. Delisting does not necessarily mean a change in company's core
strategy.
DIFFERENT SCENARIOS UNDER WHICH DELISTING TAKES PLACE
O VOLUNTARY DELISTING
If a stock of a company is removed permanently from its designated stock exchange or from any stock
exchange on which it is listed or from both as the case may be on the discretion of the company itself, it is
known as voluntary delisting of securities.
There can be numerous reasons for a company to voluntarily delist its securities. Some of the probable reasons
are mentioned below:
1. To shift to a privately managed company.
2. Merger or amalgamation of one company with the other.
3. Due to the non-performance of the shares on the particular exchange in the market.
http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Liquidationhttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Liquidationhttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Stock8/2/2019 De Listing
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4. To do away with the various mandatory official procedures which a listed company needs to
comply with.
5. Cutting down the cost of remaining listed such as fees paid to the exchange, cost of carrying
out various procedures as prescribed by the designated stock exchange.
6. Consolidating the control of a company by not having public shareholding.
7. To maintain secrecy in operations by not having to file annual reports on the earnings and
other disclosures to the public.
O COMPULSORY DELISTING
If a stock of a company is removed permanently from its designated stock exchange or from any stock
exchange on which it is listed or from both as the case may be on the discretion of the stock exchange, it is
known as compulsory delisting.
The possible reasons for which a company may be compulsorily delisted are mentioned below:
1. Non compliance to the listing agreement with the designated stock exchange for a minimum period
of six months.
2. Non payment of the listing fee.
3. Failure to file annual reports as prescribed by the designated stock exchange.
4. Inability to meet a specified criteria such as minimum level of market cap, price of the share,
volume of the listed security being traded or the frequency of trading falling below a
predetermined level.
5. Promoters' track record especially with regard to insider trading, manipulation of share prices,
unfair market practices (e.g. returning of share transfer documents under objection on frivolous
grounds with a view to creating scarcity of floating stock in the market causing unjust aberrations in
the share prices, auctions, close-out, etc.).
6. The company has become sick and unable to meet current debt obligations or to adequately
finance operations, or has not paid interest on debentures for the last 2-3 years, or has become
defunct, or there are no employees, or liquidator appointed etc.
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SECTION 2: PROCEDURE OF DELISTING AND THE REGULATIONS
GOVERNING IT
VOLUNTARY DELISTING
O DELISTING FROM ONE OR ALL THE EXCHANGES
A company may delist its equity shares from one or more recognized stock exchanges where they are listed and
continue their listing on one or more other recognized stock exchanges, subject to the following conditions:
(a) If after the proposed delisting from any one or more recognized stock exchanges, the equity shares would
remain listed on any recognized stock exchange which has nationwide trading terminals, no exit opportunity
needs to be given to the public shareholders; and
(b) If after the proposed delisting, the equity shares would not remain listed on any recognized stock exchange
having nation wide trading terminals, exit opportunity shall be given to all the public shareholders holding the
equity shares sought to be delisted in accordance with the regulations provided by SEBI for the same.
Explanation: For the purposes of this regulation, recognized stock exchange having nation wide trading
terminals means the Bombay Stock Exchange Limited, the National Stock Exchange of India Limited or any
other recognized stock exchange which may be specified by the Board in this regard.
O WHEN NO EXIT OPPORTUNITY IS REQUIRED
(a) The proposed delisting shall be approved by a resolution of the board of directors of the company in its
meeting;
(b) The company shall give a public notice of the proposed delisting in at least one English national daily with
wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the
region where the concerned recognized stock exchanges are located and the notice must include the names of
the recognized stock exchanges from which the equity shares of the company are intended to be delisted, the
reasons for such delisting and the fact of continuation of listing of equity shares on recognized stock exchange
having nation wide trading terminals;
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(c) The company shall make an application to the concerned recognized stock exchange for delisting its equity
shares which shall be disposed off by the recognized stock exchange within a period not exceeding thirty
working days from the date of receipt of such application complete in all respects; and
(d) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.
O WHEN EXIT OPPORTUNITY IS REQUIRED
Any company desirous of delisting its equity shares from all the stock exchanges on which it is listed shall:
(a) Obtain the prior approval of the board of directors of the company in its meeting;
(b) Obtain the prior approval of shareholders of the company by special resolution passed through postal
ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to
such resolution:
Provided that the special resolution shall be acted upon if and only if the votes cast by public shareholders in
favour of the proposal amount to at least two times the number of votes cast by public shareholders against it.
(c) Make an application to the concerned recognized stock exchange for in-principle approval of the proposed
delisting in the form specified by the recognized stock exchange; and
(d) Within one year of passing the special resolution, make the final application to the concerned recognized
stock exchange in the form specified by the recognized stock exchange:
Provided that in pursuance of special resolution as referred to in clause (b), passed before the commencement
of these regulations, final application shall be made within a period of one year from the date of passing of
special resolution or six months from the commencement of these regulations, whichever is later.
O EXIT OPPORTUNITY
(A)PUBLIC ANNOUNCEMENT:(1) The promoters of the company shall upon receipt of in principle approval for delisting from the recognized
stock exchange, make a public announcement in at least one English national daily with wide circulation,
one Hindi national daily with wide circulation and one regional language newspaper of the region wherethe concerned recognized stock exchange is located.
(2) The public announcement shall contain all material information and shall not contain any false or
misleading statement.
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(3) The public announcement shall also specify a date, being a day not later than thirty working days from the
date of the public announcement, which shall be the specified date for determining the names of
shareholders to whom the letter of offer shall be sent.
(4) Before making the public announcement, the promoter shall appoint a merchant banker registered with
the Board and such other intermediaries as are considered necessary.
(5) It shall be the responsibility of the promoter and the merchant banker to ensure compliance with the
provisions of this Chapter.
(6) No promoter shall appoint any person as a merchant banker if such a person is an associate of the
promoter.
(B) ESCROW ACCOUNT:(1) Before making the public announcement, promoter shall open an escrow account and deposit therein the
total estimated amount of consideration calculated on the basis of floor price and number of equity shares
outstanding with public shareholders.
(2) On determination of final price, making of public announcement and accepting the final price, the
promoter shall forthwith deposit in the escrow account such additional sum as may be sufficient to make
up the entire sum due and payable as consideration in respect of equity shares outstanding with public
shareholders.
(3) The escrow account shall consist of either cash deposited with a scheduled commercial bank, or a bank
guarantee in favour of the merchant banker, or a combination of both.
(4) Where the escrow account consists of deposit with a scheduled commercial bank, the promoter shall, while
opening the account, empower the merchant banker to instruct the bank to issue bankers cheques or
demand drafts for the amount lying to the credit of the escrow account, for the purposes mentioned in the
regulations, and the amount in such deposit, if any, remaining after full payment of consideration for equity
shares tendered in the offer and those tendered within a period of one year from the date of delisting shall
be released to the promoter.
(5) Where the escrow account consists of a bank guarantee, such bank guarantee shall be valid till payments
are made in respect of all shares tendered within a period of one year from the date of delisting.
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( C ) LETTER OF OFFER:
(1) The promoter shall dispatch the letter of offer to the public shareholders of equity shares, not later than
forty five working days from the date of the public announcement, so as to reach them at least five working
days before the opening of the bidding period.
(2) The letter of offer shall be sent to all public shareholders holding equity shares of the class sought to be
delisted whose names appear on the register of the company or depository as on the date specified in the
public announcement which should not be later than thirty working days from the date of public
announcement.
(3) The letter of offer shall contain all the disclosures made in the public announcement and such other
disclosures as may be necessary for the shareholders to take an informed decision.
(4) The letter of offer shall be accompanied with a bidding form for use of public shareholders and a form to be
used by them for tendering shares within a period of one year from the date of delisting.
(D) BIDDING PERIOD:
(1) The date of opening of the offer shall not be later than fifty five working days from the date of the public
announcement.
(2) The offer shall remain open for a minimum period of three working days and a maximum period of five
working days, during which the public shareholders may tender their bids.
(E) THE BOOK BUILDING PROCESS:
(1) The book building process shall be made through an electronically linked transparent facility and the
promoter shall enter into an agreement with a stock exchange for the purpose.
(2) The public announcement and letter of offer shall be filed without delay with the stock exchange mentioned
and such stock exchange shall forthwith post the same in its website.
(3) The minimum number of bidding centres shall be:
The four metropolitan centres situated at Mumbai, Delhi, Kolkata and Chennai;
Such cities in the region in which the registered office of the company is situated.
(4) There shall be at least one electronically linked computer terminal at all bidding centres.
(5) The shareholders may withdraw or revise their bids upwards not later than one day before the closure of
the bidding period. Downward revision of bids shall not be permitted.
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(6) The promoter shall appoint trading members at the bidding centres, whom the public shareholders may
approach for placing bids on the on-line electronic system.
(7) The shareholders holding dematerialized shares desirous of availing the exit opportunity may deposit the
equity shares in respect of which bids are made, with the special depositories account opened by the merchant
banker for the purpose prior to placement of orders or, alternately, may mark a pledge for the same to the
merchant banker in favour of the said account.
(8) The merchant banker shall ensure that the equity shares in the said special depositories account are not
transferred to the account of the promoter unless the bids in respect thereof are accepted and payments
made.
(9) The holders of physical equity shares may send their bidding form together with the share certificate and
transfer deed to the trading member appointed for the purpose, who shall immediately after entering their
bids on the system send them to the company or the share transfer agent for confirming their genuineness.
The company or the share transfer agent shall deliver the certificates which are found to be genuine to the
merchant banker, who shall not make it over to promoter unless the bids in respect thereof are accepted and
payment made. The bids in respect of the certificates which are found to be not genuine shall be deleted from
the system.
(10) The verification of physical certificates shall be completed in time for making the public announcement.
(11) The bids placed in the system shall have an audit trail which includes stock broker identification details,
time stamp and unique order number.
(12) The final offer price shall be determined as the price at which the maximum number of equity shares is
tendered by the public shareholders. If the final price is accepted, then, the promoter shall accept all shares
tendered where the corresponding bids placed are at the final price or at a price which is lesser than the final
price. The promoter may, if he deems fit, fix a higher final price.
(F) RIGHT OF SHAREHOLDERS:
(1) All public shareholders of the equity shares which are sought to be delisted shall be entitled to participate in
the book building process.
(2) A promoter or a person acting in concert with any of the promoters shall not make a bid in the offer and the
merchant banker shall take necessary steps to ensure compliance with this sub-regulation.
(3) Any holder of depository receipts issued on the basis of underlying shares held by a custodian and any such
custodian shall not be entitled to participate in the offer.
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(4) Nothing contained in sub-regulation (3) shall affect the right of any holder of depository receipts to
participate in the book building process under sub-regulation (1) if the holder of depository receipts exchanges
such depository receipts with shares of the class that are proposed to be delisted.
(G) RIGHTS OF THE PROMOTER:
(1) The promoter shall not be bound to accept the equity shares at the offer price determined by the book
building process.
(2) Where the promoter decides not to accept the offer price so determined:
The promoter shall not acquire any equity shares tendered pursuant to the offer and the equity shares
deposited or pledged by a shareholder and shall be returned or released to him within ten working
days of closure of the bidding period;
The company shall not make the final application to the exchange for delisting of the equity shares;
The promoter may close the escrow account opened; and
In a case where the public shareholding at the opening of the bidding period was less than the
minimum level of public shareholding required under the listing agreement, the promoter shall ensure
that the public shareholding shall be brought up to such minimum level within a period of six months
from the date of closure of the bidding through issue of new shares or promoter making an offer for
sale of his holdings or promoter making sale of his holdings through the secondary market in a
transparent manner.
(H) SUCCESSFUL OFFER:
An offer shall be deemed to be successful if post offer, the shareholding of the promoter (along with the
persons acting in concert) taken together with the shares accepted through eligible bids at the final price
determined by the reverse book building process, reaches the higher of:
(1) Ninety per cent of the total issued shares of that class excluding the shares which are held by a custodian
and against which depository receipts have been issued overseas; or
(2) The aggregate percentage of pre offer promoter shareholding (along with persons acting in concert with
him) and fifty per cent of the offer size.
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(I) AFTER THE CLOSURE OF THE OFFER:Within eight working days of closure of the offer, the promoter and the merchant banker shall make a public
announcement in the same newspapers in which the public announcement for the proposed delisting was
made regarding:
(1) The post offer level of promoters holdings; and
(2) The acceptance or rejection of the final price by the acquirer as determined by the reverse book building
process.
(J) PAYMENT OF CONSIDERATION AND RETURN OF EQUITY SHARES:
(1) The promoter shall immediately on ascertaining the success of the offer, open a special account with a
banker to an issue registered with the Board and transfer thereto, the entire amount due and payable as
consideration in respect of equity shares tendered in the offer, from the escrow account.
(2) All the shareholders whose equity shares are verified to be genuine shall be paid the final price stated in the
public announcement within ten working days from the closure of the offer.
(3) The equity shares deposited or pledged by a shareholder shall be returned or released to him, within ten
working days from the closure of the offer, in cases where the bids pertaining thereto have not been accepted.
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(K) RIGHT OF REMAINING SHAREHOLDERS TO TENDER EQUITY SHARES:
(1) Where, pursuant to acceptance of equity shares tendered in terms of these regulations, the equity shares
are delisted, any remaining public shareholder holding such equity shares may tender his shares to the
promoter up to a period of at least one year from the date of delisting and, in such a case, the promoter shall
accept the shares tendered at the same final price at which the earlier acceptance of shares was made.
(2) The payment of consideration for shares accepted under sub-regulation (1) shall be made out of the balance
amount lying in the escrow account.
(3) The amount in the escrow account or the bank guarantee shall not be released to the promoter unless all
payments aremade in respect of shares tendered under sub-regulation (1).
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O INDICATIVE TIMELINE FOR THE WHOLE PROCESS
ACTIVITY TIMELINE (DAYS)
Draft the notice of Board Meeting to consider Delisting 0
Board Meeting 0 + 8
Draft the notice of General Meeting 0 + 15
General Meeting of shareholders to pass special resolution 0 + 40
Open escrow account 0 + 46
Obtain market price data from the stock exchanges 0 + 47
Finalize the draft of the Public Announcement 0 + 48
Fund the escrow account 100% 0 + 52
Publish Public Announcement in newspapers 0 + 55
Trading members to request exchanges to provide infrastructure 0 + 59
Exchanges to provide infrastructure facility at terminal of trading members 0 + 60
Delisting bid opens for demat/physical shareholders 0 + 61
Delisting bid closes for demat/physical shareholders 0 + 70
Analyze the response to reverse book building 0 + 71
Determine the final offer price based on the response 0 + 71
Go/ No decision based on the final effective price versus Promoters value 0 + 71
Public announcement of final offer price 0 + 73
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Open payment account for release of purchase consideration 0 + 73
Delisting offer opens for physical shareholders 0 + 73
Delisting offer closes for physical shareholders 0 + 87
File delisting application with exchanges 0 + 96
Listing department to recommend delisting to Listing Committee 0 + 111
Stock exchanges to issue delisting approval letter 0 + 124
Public Announcement to appear in newspapers 0 + 132
Arrange for exit option facility for demat shareholders 0 + 132
Arrange for exit option facility for physical shareholders 0 + 132
Open payment account and fund it 0 + 132
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COMPULSORY DELISTING
O
CRITERIA FOR COMPULSORY DELISTING(1) The recognized stock exchange shall take all reasonable steps to trace the promoters of a company whose
equity shares are proposed to be delisted.
(2) The recognized stock exchange shall consider the nature and extent of the alleged non-compliance of the
company and the number and percentage of shareholders who may be affected by such non-compliance.
(3) The recognized stock exchange shall take reasonable efforts to verify the status of compliance of the
company with the office of the concerned Registrar of Companies.
(4) The names of the companies whose equity shares are proposed to be delisted and their promoters shall be
displayed in a separate section on the website of the recognized stock exchange for a brief period of time. If
delisted, the names shall be shifted to another separate section on the website.
(5) The recognized stock exchange shall in appropriate cases file prosecutions under relevant provisions of the
Securities Contracts (Regulation) Act, 1956 or any other law for the time being in force against identifiable
promoters and directors of the company for the alleged non-compliances.
(6) The recognized stock exchange shall in appropriate cases file a petition for winding up the company under
section 433 of the Companies Act, 1956 (1 of 1956) or make a request to the Registrar of Companies to strike
off the name of the company from the register under section 560 of the said Act.
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O DELISTING BY A STOCK EXCHANGE
(1) A recognized stock exchange may, by order, delist any equity shares of a company on any ground prescribed
in the rules made under section 21A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956):
Provided that no order shall be made under this sub-regulation unless the company concerned has been given
a reasonable opportunity of being heard.
(2) The decision regarding compulsory delisting shall be taken by a panel to be constituted by the recognized
stock exchange consisting of:
(a) Two directors of the recognized stock exchange (one of whom shall be a public representative);
(b) One representative of the investors;
(c) One representative of the Ministry of Corporate Affairs or Registrar of Companies; and
(d) The Executive Director or Secretary of the recognized stock exchange.
(3) Before making an order under sub-regulation (1), the recognized stock exchange shall give a notice in one
English national daily with wide circulation and one regional language newspaper of the region where the
concerned recognized stock exchange is located, of the proposed delisting, giving a time period of not less than
fifteen working days from the notice, within which representations may be made to the recognized stock
exchange by any person who may be aggrieved by the proposed delisting and shall also display such notice on
its trading systems and website.
(4) The recognized stock exchange shall while passing any order under sub-regulation (1), consider the
representations, if any, made by the company as also any representations received in response to the notice
given under sub-regulation (3) and shall comply with the criteria for compulsory delisting.
(5) Where the recognized stock exchange passes an order under sub-regulation (1), it shall:
(a) Forthwith publish a notice in one English national daily with wide circulation and one regional language
newspaper of the region where the concerned recognized stock exchange is located, of the fact of such
delisting, disclosing therein the name and address of the company, the fair value of the delisted equity shares
(as determined by the independent valuer(s) appointed by the recognized stock exchange) and the names and
addresses of the promoters of the company who would be liable acquire delisted equity shares from the public
shareholders by paying them the value determined by the valuer, subject to their option of retaining their
shares.; and
(b) Inform all other stock exchanges where the equity shares of the company are listed, about such
delisting and the surrounding circumstances.
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O RIGHTS OF PUBLIC SHAREHOLDERS IN CASE OF COMPULSORY DELISTING:
(1) Where equity shares of a company are delisted by a recognized stock exchange, the recognized stock
exchange shall appoint an independent valuer or valuers who shall determine the fair value of the delisted
equity shares.
(2) The recognized stock exchange shall form a panel of expert valuers from whom the valuer or valuers shall
be appointed for purposes of sub-regulation (1).
(3) The promoter of the company shall acquire delisted equity shares from the public shareholders by paying
them the value determined by the valuer, subject to their option of retaining their shares.
Explanation: For the purposes of sub-regulation (1):
(a) Valuer means a chartered accountant within the meaning of clause (b) of section 2 of the Chartered
Accountants Act, 1949 (38 of 1949), who has undergone peer review as specified by the Institute of Chartered
Accountants of India constituted under that Act, or a merchant banker appointed to determine the value of the
delisted equity shares;
(b) Value of the delisted equity shares shall be determined by the valuer having regard to the factors
mentioned in regulation 15 of the (DELISTING OF EQUITY SHARES) REGULATIONS, 2009.
O CONSEQUENCES OF COMPULSORY DELISTING
Where a company has been compulsorily delisted, the company, its whole time directors, its promoters and the
companies which are promoted by any of them shall not directly or indirectly access the securities market or
seek listing for any equity shares for a period of ten years from the date of such delisting.
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SECTION 3: CASE STUDIES
RAYBAN SUN OPTICS
O OVERVIEW OF EVENTS
RayBan Sun Optics India Limited is a US$72m company that manufactures RayBan
brand of eyewear products consisting of sunglasses and prescription frames
In April 1999, Luxottica Group SpA acquired Bausch & Lombs global eyewear business
Bausch & Lombs 44.15% stake in RayBan Sun Optics was transferred to
RayBan Indian Holdings
Luxottica contended the stake transfer was part of a global agreement and was
not a domestic acquisition
Supreme Court of India insisted an open offer was to be made
In January 2007, Luxottica announced an open offer to acquire an additional 20% stake
for c. US$15m
In April 2007, revised offer to acquire total of 30.82%at a price of Rs 104.3 per share
for existing shareholders and Rs 185.25 per share (Rs 185.25 = Rs 104.3 plus interest of
Rs 80.95, calculated @ 10% p.a. from 27 Aug 1999 29 May 2007) for continuing
shareholders (prior Aug 99)
The MNC currently holds c. 70.54% in the Indian entity
In July 2008, Luxottica proposed a voluntary delisting of RayBan India by acquiring the
remaining 29.46%
Second open offer to acquire all remaining shares at an exit price of Rs 140 per share
72% premium to 26 week average price and a 25% premium to the two week
price
Delisted to achieve more flexibility and greater efficiency in the operations and
management of the company
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O EVENT TIMELINE
April 1999: Acquisition, Acquired 44.15% indirectly through acquisition of Bausch & Lombs global eyewear
business.
January 2007: 1st
Open offer, proposed acquisition of c.30.82% for US$21m.
May 2007: 1st
Open offer closed, amount spent = US$17m, % acquired = c.26.37%.
July 2008: Delisting offer, proposed acquisition of c.29.46% (in order to increase holding to 100%) at an
exit price of Rs 140 per share.
O SHARE PRICE MOVEMENT
0
200,000
400,000
600,000
800,000
Sep-08Jul-08A pr-08Jan-08Oct-07Jul-07A pr- 07Jan-07
0
40
80
120
160
V olume Price
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BOSCH CHASSIS SYSTEMS
O OVERVIEW OF EVENTS
Robert Bosch chassis systems India (RBIC) is a subsidiary of the German diversified
Robert Bosch group (RBG)
Established in 1982, RBIC manufactures world-class Hydraulic Brake Systems
Until 11th November 2008, the company was listed and RBG owned 80% of total share
capital
On the 29th of February 2008, RBG announced an open offer to buy the remaining 20%
of RBIC through a reverse book building process with a floor price floor price of Rs. 415
Book building started on 24th March 2008 and ended on 28th March 2008
The price revealed in this process was Rs. 750 which was deemed too high and the
offer was withdrawn on the 1st of April 2008
On the 11th of June 2008, RBG renewed offer at fixed price of Rs. 600 for all
outstanding share capital
Proposal approved by board of RBIC on 13th June 2008
Formal offer made on the 17th of July 2008
Offer period opened on the 4th of August 2008 and closed on the 8th of August
2008
At the end of the delisting offer, RBG reported a total stake of 95.87%
O EVENT TIMELINE
February 2008: 1st Delisting offer, Proposal to acquire remaining 20% through reverse book building process.
April 2008: Discovered exit price of Rs. 750, Reverse book building price too high for RBG and offer is
dropped.
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June 2008: 2nd Delisting offer, fixed price of Rs. 600 for all shares approved by board on the 13th of June
2008.
October 2008: Final Shareholding of 95.87%, Delisted on the 29th of November 2008.
O SHARE PRICE MOVEMENT
0
200
400
600
800
Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08
0
100,000
200,000
300,000
400,000
500,000
V olume Pr ic e
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PANASONIC AVC NETWORKS
O OVERVIEW OF EVENTS
Formerly known as Matsushita Television & Audio India, Panasonic AVC Networks India
was incorporated in 1996 as a subsidiary of Matsushita Electric Company (MEI)
Panasonic AVC manufactures televisions, audio systems, plasma TV and home
theatre systems
MEI originally owned 55% and Indian promoters owned 27.7% of Panasonic AVC
Announced plans to buy the remaining 17.3% from the public in 2007
The floor price was quoted at Rs. 14.16
The company followed the reverse book building method at an indicative price of Rs.
18 (premium of 27% on the floor price) to delist in accordance with the SEBI delisting
guidelines
The company successfully delisted as promoter shareholding increased to over 90%
stake
MEI had an agreement with the Indian co-promoters that if delisting is not successful
the promoters will sell their shares with a view to increasing the public shareholders for
the company to comply with the minimum public shareholding level
O EVENT TIMELINE
August 2007: Announced delisting plan
September 2007: Conductedthe reverse book building process to delist
December 2007: Delisted
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O SHARE PRICE MOVEMENT
0
5
10
15
20
25
30
35
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
0
200
400
600
800
1,000
1,200
1,400
Panasonic AVC Networks (LHS) Volume (RHS)
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SECTION 4: CONCLUSION
REASONS THAT MAKE INVESTING IN A STOCK WHICH IS ABOUT TO GET
DELISTED LUCRATIVE:
Short gestation period of the investment.
Since the whole process of delisting of shares of a company from a stock exchange takes around 132
days (approx. 4-5 months), the investment need not be locked in for a long time for it to reap desired
return.
Price offered by the acquirer is higher than the prevailing market price.
The reverse book building process is governed by SEBI such that the final so discovered through it is
generally higher than the prevailing market of the security sought to be delisted.
Can be considered moderately safe if the investor is ready to do some homework on the company.
Its not a game of gambling, one has to do a proper research on any prospect opportunity in order to
take full advantage of that opportunity. This is because a wrong prediction might result in a huge loss.
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RISKS INVOLVED:
There is no guarantee that a delisting proposal will materialize.
The incidents of revocation of a delisting proposal arent very common but they do take place and
when they do, the stock prices take a deep fall leading to the detrimental effects on the investment so
made.
The required level of promoters holdings might not be achieved so as to be able to delist the stock.
In case the minimum level of shareholding is not achieved by the promoters, the whole delisting
proposal can go down the pipes leaving the value of the investment to fall sharply.
The promoter may reject the final exit price determined through reverse book building process.
Even if everything goes according to the plan and a favorable price (to the investor)is arrived at after
the book building process, the promoter has a right to reject that final price if it is not feasible
according to him. In this case also, the whole delisting proposal will be withdrawn.
The stock prices will fall sharply if the delisting proposal does materialize thereby incurring a loss to
the investor.
Whenever a delisting proposal is withdrawn or falls apart, there is a wave of panic among the investors
to get out of the market. This puts high selling pressure leading the price of the stock to fall sharply and
thereby the value of the investment also takes a dip.
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BIBLIOGRAPHY
http://www.legalserviceindia.com/article/l329-Listing-&-Delisting-Of-
Securities.html
http://www.sebi.gov.in/acts/delisting2009.pdf
http://moneycontrol.com
http://toostep.com/insight/sebi-delisting-of-equity-shares-regulations-2009
http://www.sebi.gov.in/faq/faqdelist.html
http://economictimes.indiatimes.com/features/financial-times/Delisting-of-
shares/articleshow/2661671.cms
http://www.answers.com/topic/delist
http://www.legalserviceindia.com/article/l329-Listing-&-Delisting-Of-Securities.htmlhttp://www.legalserviceindia.com/article/l329-Listing-&-Delisting-Of-Securities.htmlhttp://www.sebi.gov.in/acts/delisting2009.pdfhttp://moneycontrol.com/http://toostep.com/insight/sebi-delisting-of-equity-shares-regulations-2009http://www.sebi.gov.in/faq/faqdelist.htmlhttp://economictimes.indiatimes.com/features/financial-times/Delisting-of-shares/articleshow/2661671.cmshttp://economictimes.indiatimes.com/features/financial-times/Delisting-of-shares/articleshow/2661671.cmshttp://www.answers.com/topic/delisthttp://www.answers.com/topic/delisthttp://economictimes.indiatimes.com/features/financial-times/Delisting-of-shares/articleshow/2661671.cmshttp://economictimes.indiatimes.com/features/financial-times/Delisting-of-shares/articleshow/2661671.cmshttp://www.sebi.gov.in/faq/faqdelist.htmlhttp://toostep.com/insight/sebi-delisting-of-equity-shares-regulations-2009http://moneycontrol.com/http://www.sebi.gov.in/acts/delisting2009.pdfhttp://www.legalserviceindia.com/article/l329-Listing-&-Delisting-Of-Securities.htmlhttp://www.legalserviceindia.com/article/l329-Listing-&-Delisting-Of-Securities.html
