Delisting and relisting on stock exchanges; all you need to know - CNBCTV18
Chemplast Sanmar, a resin manufacturer for PVC pastes, just launched its public offering on August 10, with 2.17x subscriptions on the final day of the IPO. The company’s IPO was worth Rs 3,850 crore, with equity shares being at the suggested price band of Rs 530-541.
But this is not the first time that the company will be trade at the Bombay Stock Exchange, Metropolitan Stock Exchange and the National Stock Exchange. The company was being traded up until 2012 when it was delisted.
The move was taken as the company was having a difficult time with its operations, which were severely affected by wide fluctuations in petrochemical prices and complicated by delays in collecting revenues from its large projects due to delays in their commissioning.
What is delisting?
Delisting is the dismissal of a listed company from the stock exchange. Delisting can be voluntary or happen as a result of ceased operations, bankruptcy, mergers, and non-compliance with listing requirements.
Some companies wish to voluntarily become private again when the benefits of the remaining public are outweighed by the costs. This was the case with Chemplast Sanmar. The company had recorded four continuous years of losses on the back of the global financial crisis of 2008.
However, while delisting the company has to follow the guidelines and regulations set out by the Securities Exchange Board of India (SEBI).
According to Section 5.1 of the Securities And Exchange Board Of India (Delisting Of Securities) Guidelines - 2003, “A company may delist from the stock exchange where its securities are listed. Provided that the securities of the company have been listed for a minimum period of 3 years on any stock exchange. Provided further that an exit opportunity has been given to the investors for the purpose of which an exit price shall be determined in accordance with the ‘book building process’ described in clauses 7-10 and 13 and 14 of these guidelines.”
In August alone, three companies have been delisted from the stock exchanges according to SEBI.
How can companies relist?
Companies can get relisted on stock exchanges by fulfilling the listing criteria once more and filing the appropriate paperwork again. In essence, a relisting is identical to a new listing or an IPO, which is why Chemplast Sanmar’s relisting has been called an IPO.
However, a company can only relist two years from the time that it first delisted, according to the SEBI rules.
Section 18.1 of the above rules states, “Reinstatement of delisted securities should be permitted by the stock exchanges with a cooling period of 2 years. In other words, relisting of securities should be allowed only after 2 years of delisting of the securities. It would be based on the respective norms/criteria for listing at the time of making the application for listing and the application will be initially scrutinised by the Central Listing Authority.”
Chemplast is not the only company to seek a relisting. Coffee Day Enterprises, which runs the Cafe Coffee Day chain, Max India, Ruchi Soya, Bajaj Auto and Bajaj Finserv are some large companies that have either relisted or are in the process of relisting soon.
(Edited by : Shoma Bhattacharjee)