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SEBI allows delisting through a fixed-price offer

05 Jul 2024

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In its board meeting on 27 June 2024, SEBI decided to allow public companies to be delisted through a fixed-price offer as an alternative to the existing reverse book building method. This move is expected to ease the path for take-private transactions and bolster public M&A deal activity.

Partner: Sanjam Arora, Senior Associate: Prashant Khurana, Associate: Madhav Nakra

1 Background

Taking public companies private in India has always been a complex and costly process. One of the main challenges is the reverse book building method of price discovery, which applies to a delisting offer. This method involves public shareholders bidding on the price at which they are willing to sell their shares in the delisting offer. This has produced sub-optimal outcomes, with the delisting price often being at an exorbitant premium, at times more than double the regulatory floor price. The complexity of the price discovery mechanism also leaves the process vulnerable to market manipulation by speculators.

In August 2023, the Securities and Exchange Board of India (SEBI) floated a consultation paper that proposed allowing delisting through a fixed-price offer. (To read our detailed update on this proposal, click here.) SEBI has now followed through on this by approving the proposal, with some modifications, in its board meeting on 27 June 2024.

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