While bookbuilding as well as reverse book building process both facilitate price discovery, bookbuilding methodology is adopted when a company plans to raise capital and the other is applied when the company voluntarily engaged in delisting. The same process was continued in sebi delisting of equity shares regulations, 2009 delisting regulations, 2009 which superseded the. Sebi proposed exemption of listed companies from following the delisting regulations in case of merger with a listed parent company, if the shareholders of the subsidiary are. Review of reverse book building process background 1 sebi came out with sebi delisting of securities guidelines, 2003 whereby the concept of price fixation was changed from fixed price announced by the acquirer to a reverse book built price determined by the existing public shareholders. Securities and exchange board of india is made for protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto. The success of the offer depends on the percentage of public shareholders agreeing to give their shares on the final price. Sebi said there are cases of listed companies with listed subsidiaries and equity shares of both the companies being actively traded on stock exchanges. Sebi guidelines defines book building as a process undertaken by which the demand for the securities proposed to be issued by a body corporate is elicited and builtup and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document. Sebi tightens insider trading norms, eases delisting rules.
Currently, investors can demand anything above the floor price during reverse book building, which decides the price companies need to pay public shareholders to buy back shares to delist. Delisting offer price the reverse book building process for discovering the offer price of shares for delisting offer has been retained. The counter offer is made in case the price discovered through reverse book building rbb is not acceptable to the promoter or the acquirer. Sebi proposes relaxation from delisting norms the new. What is reverse book building all you have to know about it. This could make it difficult for promoters to delist their companies, said experts. Sebi tightens delisting and insider trading regulations. Reverse book building is the process by which a company that wants to delist from the bourses, decides on the price that needs to be paid to. It happens in the same manner as book building happens in case of ipo or fpo. Book building is the process of determining the price at which an initial publicoffering will be offered. Reverse book building is the process by which a company that wants to delist from the bourses, decides on the price that needs to be paid to public shareholders to buy back shares. Markets regulator sebi today proposed measures to provide promoters a say in the price offered to shareholders of companies that are planning to delist from stock exchanges.
Issue of shares through book building process by cs. Securities and exchange board of india has issued the sebi delisting of securities guidelines 2003 for delisting of shares from stock exchanges. Sebi slashes timeline for delisting of firms to 76 days. As per sebi guidelines a company can issue securities in following manner through the book building route. Securities and exchange board of india has issued the sebi delisting of equity shares regulations 2009 providing for voluntary delisting of equity shares from stock exchanges along with the overall framework for voluntary delisting by a promoter or acquirer through a process referred to as reverse book building. Equity shares, reverse book building process, sebi, securities and exchange board of india, securities and exchange board of india delisting of equity shares regulations 2009, securities and exchange board of india listing obligations and disclosure requirements regulations 2015, securities and exchange board of india substantial acquisition of shares and takeovers regulations. All you wanted to know about reverse book building the. Sebi delisting of equity shares regulations, 2009 an overview framework of sebi delisting of equity shares. Amendment to the sebi delisting of equity shares regulations, 2009 delisting regulations notified to, inter alia, implement a proposal described in its june 16, 2018 discussion paper to enable promoters to provide a counteroffer as a part of the reverse book building process.
All you wanted to know about reverse book building the hindu. About reverse bookbuilding securities and exchange board of india has issued the sebi delisting of equity shares regulations 2009 for voluntary delisting of equity shares from stock exchanges which provide the overall framework for voluntary delisting by a promoter or acquirer through a process referred to as reverse book building. Sebi planning measures to ease delisting process for firms. Sebi has brought down the timeline for delisting of companies from 7 days to 76 days. Currently, delisting norms stipulate that all firms including listed subsidiary which want to be delisted have to follow follow sebi s delisting norms including reverse book building process. Amendments to the delisting regulations a welcome move. While book building is to issue shares to public, reverse book building is to buyback the shares from the public. Voluntary delisting whereby the exit price is determined through the reverse book building process the floor price is calculated in accordance with the regulations. The only difference is, as this process is for buy. How does reverse book building process work for delisting.
However, sebi exempted companies with paidup capital of up to. Reverse book building is a mechanism by which the acquirercompany offers to buy back shares from its shareholders. In the book building method, the demand is known every day during the offer period, but in fixed price method, the demand is known only after the issue closes. Other norms will be part of sebis delisting regulations. When a company has excess cash on their balance sheet or the company wants to increase the shareholding of the promoters or when a promoter wants to delist from stock exchange they can buyback the shares from existing public shareholders through a reverse book building process, subject to necessary approvals from sebi. Another step towards an efficient delisting mechanism. Amendments to sebi delisting and takeover regulations. Reverse bookbuilding for delisting price the economic times. The option of book building shall be available to all body corporate which are otherwise eligible to make an issue of capital to the public. Reverse book building solved question of cs executive dec 2017. However, the floor price is to be determined as per the mechanics provided in the takeover regulations. The issuer company shall have an option of either reserving the securities for firm allotment or issuing the securities through book building process.
When bidding for the shares, investors have to decide at which price they would like to bid for the shares, for e. The reverse book building is basically a process used for efficient price discovery. Once the resolution process kicksin, the new management undertakes the delisting process right away based on the price they quoted. Sebi delisting of securities regulations, 2009 provide an exit mechanism to the existing shareholders in the following manner. It is a process of book building used when the shares of a company are delisted from stock exchanges. Delisting would, however, be disallowed if the promoter or. The changes in the book building process were suggested as the regulators assessment. Book building is a process by which the issuer company before filing of the prospectus, buildsup and ascertains the demand for the securities being issued and assesses the price at which such securities may be issued and ultimately determines the quantum of securities to be issued. Sebi said the delisting process would be considered successful only when the shareholding of the acquirer, together with the shares tendered by public shareholders, reaches 90% of the total share capital, as first reported by et. However, in the proposed scenario, the listed subsidiary would be delisted without following the delisting regulations. Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner book building is an alternative method of making a public issue in which applications are accepted from large buyers such as financial institutions, corporations or high networth. Initially, book building process was permitted for placement. Regulatory alert tracking change sebi delisting of equity.
Issuing a draft paper, sebi has suggested for a price discovery as per reverse book building rrb method, along with. In case of delisting process which has provisions becoming effective but where reverse book building process is not completed, such delisting process shall sebi is now empowered to grant relaxation from strict enforcement of any of the requirements of delisting regulations on being satisfied that the seeking the exemption the. Reverse book building nse national stock exchange of india ltd. Book building is the process by which an underwriter attempts to determine at what price to offer an initial public offering ipo based on demand from institutional investors. Sebi is considering such a fixedprice mechanism, although at a marketdetermined rate, for delisting as reverse book building is not followed in most of the developed markets. Procedures nse national stock exchange of india ltd. The book value per share of the company shall be disclosed in the public announcement for counter offer, the regulator said in a circular.
The securities and exchange board of india sebi recently amended the sebi delisting of equity shares regulations 2009 delisting regulations and made corresponding changes to. While book building as well as reverse book building process both facilitate price discovery, book building methodology is adopted when a company plans to raise capital and the other is applied. The guidelines inter alia provide the overall framework for voluntary delisting by a promoter. Sebi provides framework, timeline for counter offer process. Securities and exchange board of india has issued the sebi delisting of equity shares regulations 2009 providing for voluntary delisting of equity shares from stock exchanges along with the overall framework for voluntary delisting by a. Sebi guidelines for book building management paradise. Reference date for determining floor price for delisting offer is modified. In contrast, in a regular delisting, a company has to undertake reverse book building process which determines the delisting offer price. Sebi has proposed various alternatives to the existing model of price discovery and measures to increase participation in the reverse book building process. After the date of the closing of offer, the final price shall be decided by the promoters in consultation with the merchant banker. Concepts and process of book building mba knowledge base.
Sebi proposes relaxation from delisting norms for listed. Delisting of shares under sebi delisting of securities guidelines 2003. Flowchart on reverse book building process 35 documents to be submitted alongwith bid form for submission of bids 37. What is the difference between voluntary delisting and. Securities and exchange board of india has issued the sebi delisting. What is book building and how it differs from reverse book. Markets regulator sebi wednesday came out with the framework and timeline for the counter offer process.
Further, to shorten the delisting process, an indicative timeline has been proposed which could shorten the delisting process from 7 days as it stands today, to 64 days. Book building method of public issue book building. In this method, the company doesnt fix up a particular price for the shares, but instead gives a price range, e. The introduction of bookbuilding in india was done in 1995 following the recommendations of an expert committee appointed by sebi under y. Consultation paperinnovators growth platform norms for companies listed on igp to trade under regular category of main board of recognized stock exchanges. Now the reverse book building will be open for the maximum for 7 working days. Sebi discussion paper on delisting of equity shares. According to senior officials, the government and sebi are of the view that the reverse book building mechanism has worked well over three years it has been in practice. Letter from lead manager providing details of the issue. From the perspective of acquirers, the issues highlighted are summarised as under.
Book building book building is actually a price discovery method. It is a mechanism where, during the period for which the reverse book building is open, offers are collected from the share holders at various prices, which are above or equal to the floor price. Sebi regulations book building process ca suresh keswani. Reverse book building is a process which assist one in discovering fair price for buying back shares from open market. The book building process ensures checks and balances on both sides, the investor and the promoter, and it makes sense to continue with the existing norms, an official said. The proposal is aimed at plugging loopholes in the current delisting method for companies.