The Securities and Exchange Board of India’s (Sebi) board which is scheduled to meet on June 18, is likely to discuss a host of reforms, including allowing voluntary delisting of public sector undertakings (PSUs) where government holds 90 per cent or above stake and permitting founders of startups to retain employee stock options (ESOPs) post listing of their companies.
The Sebi board is likely to create a separate carve out mechanism for voluntary delisting for PSU, where the government’s shareholding equals to exceed 90 per cent of the total issued shares, according to market participants.
Delisting of securities means the removal of securities of a listed company from a stock exchange. Delisting of a company is considered to be successful, if the post offer shareholding of the promoter or promoter group along with the shares tendered by public shareholders reaches 90 per cent of the total issued shares.
In a draft paper issued in the last month, Sebi had said a few PSUs have thin public float and poor financials. Although some of these PSUs may be profitable, they might not have a future due to outdated product lines or government’s decisions to sell-off their assets such as individual units.
The consultation paper said that since the shares of these PSUs are held by the government, it reduces risks and offers more security for investors. This, in turn, results in a heightened market price, which in certain cases may not be commensurate with the book value of these companies.
According to the draft paper, if such PSUs are to undertake delisting, being frequently traded, the 60 days’ volume weighted average market price will be required to be taken into consideration, which will lead to higher floor price and consequently result in higher budgetary outlay for the government.
In the meeting, the board may also consider the proposal to allow founders of new-age tech companies, or startups, planning to launch initial public offering, and who are classified as promotor or promoter group in the draft offer document, to continue to hold, exercise or avail ESOPs granted one year before the company undertakes IPO. Currently, while employees of a company are eligible for ESOP, promoters are not entitled to receive it.
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The Sebi board may also take up issues such as treatment of Infrastructure Investment Trusts (InvIT) and Real Estate Investment Trusts (REIT) as equity, providing flexibility to alternative investment funds (AIF) to offer co-investment opportunities to investors and to facilitate regulations for foreign portfolio investors (FPIs) investing in government bonds, market experts said.
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