IB - Ps Ch.9 Exit Offers

Reulatory Requirements for delisting

Has to be listed for 3 years
Approval from shareholders
Merchant banker
Public announcement – floor price, trading centers, trading members, time table of bidding process, Stock exchanges, material facts etc.
Floor price – average of 26 weeks traded price
No maximum price for the offer
Infrequently traded shares – As per Takeover Code
Escrow account - deposit 100% of amount required (at the floor price)
Bidding atleast 3 days
Option to revise bids before bidding closes
Final price – Reverse book building – price at which maximum shares have been offered for sale
Option to accept or reject
Second public announcement to me made within two days
De-listing application and seek approval from stock exchange(s)
If quantity of outstanding shares after the buy back does not fall below minimum requirements, then company remains listed
The promoter shall not acquire any shares and the offer should be cancelled
The public shareholding has to be brought up to required minimum within 6 months
Offer for sale
New issue
Sale in the secondary market
Outstanding convertibles – conversion process has to be completed or exercise period of conversion option should have lapsed
De-listing offer need not be given in cases where securities continue to be traded in stock exchange having nationwide trading terminals


Buyback Rules in India


This was not permitted under Indian law until 1999
In October 1998, the law was amended that introduced 4 types of buy backs
We discuss in brief the below methods:
Buy back by unlisted public and private companies
Buy back by listed companies
Open market purchase through stock exchange mechanism

Provisions shall apply to all types including ESOP shares and other securities as may be specified from time to time
Buy back may be approved by a special regulation in a general meeting
Buy back has to be financed out of free reserves or securities account or form proceeds of earlier issue of dissimilar share

Under SEBI buy back regulations, it is mandatory to engage a merchant banker to prepare a L of O (Letter of Offer) and manage buy back offer
Pricing mechanism fixed by the board of companies
Requirement of an escrow account to be opened under the Tender Offer and the book building methods to the extent specified under regulations
The offer shall not open before 7 days and not after 30 days from the specified date and shall be kept open for a minimum of 15 days and a maximum of 30 days