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THOUGH not much of a trend, considering the large number of companies listed on BSE and NSE, three companies will hit the road to delisting shares from exchanges over the next two weeks. According to merchant bankers, several companies — that earlier had plans to delist, but were waiting for right market levels — are now considering exit options, thanks to bearish market conditions over the past six months and a steep decline in stock prices. This will allow them to buy out minority shareholders, if they so desire, cheaply.
The promoters of three companies — DGP Securities, Lotte India and Pearl Global — are expected to start reverse book-building process from April 27, May 4 and May 6, respectively, to delist shares from exchanges. While the Mumbaibased DGP Securities (market price on Friday: Rs 168.5) only has 3.7% of its entire shareholding with external investors, Pearl Global (market price: Rs 49.20) and Lotte India (market price: Rs 437.10) have 25.3% and 19.6% as public shareholding.
In case of Lotte India, the Seoulbased Lotte Confectionery Company holds 80.3% of overall paid-up equity. The BSE-listed House Of Pearl Fashion (excluding other promoters) owns over 60% shares in Pearl Global. All the three companies are thinly-traded on bourses.
"We're recommending clients (promoters) to go for delisting as the market is not valuing the shares rightly. In several instances, valuations of companies are way below their fundamentals," said Sharad Rathi, investment banking head of Almondz Global Securities.
"It is difficult to raise money (from strategic investors) at such abysmal valuations; so the better option is to delist and then scout for strategic investors," Mr Rathi added.
The regulation states that if the public shareholding slides to 10% (25% in companies with higher m-cap) or less of the voting capital of the company, the acquirer making the offer, has the option to buy out the remaining shareholders.
According to merchant bankers, current markets are favourable for delisting as the 26-week price average stock price — usually the basis for arriving at the offer price — would be much lower (since October 2008) than what it was in the first half of 2008. Both the acquirer (promoter) and investors have the right to accept or refuse the exit price arrived at through the reverse book-building offer. "One of the major reasons is the attractive floor-pricing at current market levels. We're seeing promoters of closely-held companies using the opportunity to exit exchanges; most of them are not willing to dilute shareholding to allow more public investors," said a Delhi-based merchant banker.
The promoters of three companies — DGP Securities, Lotte India and Pearl Global — are expected to start reverse book-building process from April 27, May 4 and May 6, respectively, to delist shares from exchanges. While the Mumbaibased DGP Securities (market price on Friday: Rs 168.5) only has 3.7% of its entire shareholding with external investors, Pearl Global (market price: Rs 49.20) and Lotte India (market price: Rs 437.10) have 25.3% and 19.6% as public shareholding.
In case of Lotte India, the Seoulbased Lotte Confectionery Company holds 80.3% of overall paid-up equity. The BSE-listed House Of Pearl Fashion (excluding other promoters) owns over 60% shares in Pearl Global. All the three companies are thinly-traded on bourses.
"We're recommending clients (promoters) to go for delisting as the market is not valuing the shares rightly. In several instances, valuations of companies are way below their fundamentals," said Sharad Rathi, investment banking head of Almondz Global Securities.
"It is difficult to raise money (from strategic investors) at such abysmal valuations; so the better option is to delist and then scout for strategic investors," Mr Rathi added.
The regulation states that if the public shareholding slides to 10% (25% in companies with higher m-cap) or less of the voting capital of the company, the acquirer making the offer, has the option to buy out the remaining shareholders.
According to merchant bankers, current markets are favourable for delisting as the 26-week price average stock price — usually the basis for arriving at the offer price — would be much lower (since October 2008) than what it was in the first half of 2008. Both the acquirer (promoter) and investors have the right to accept or refuse the exit price arrived at through the reverse book-building offer. "One of the major reasons is the attractive floor-pricing at current market levels. We're seeing promoters of closely-held companies using the opportunity to exit exchanges; most of them are not willing to dilute shareholding to allow more public investors," said a Delhi-based merchant banker.
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