Partial delisting in its essence would mean that business undertaking of the listed company gets merged into an unlisted company, through scheme of arrangement, whereby in addition to approval of SEBI, approval of National Company Law Tribunal, Central Government i.e. Regional Director and Registrar of Companies is also required to be obtained. Essentially, non-core business undertaking of a listed company not having substantial value gets delisted through such scheme of arrangement where as a consideration for demerger, instead of equity shares, redeemable preference shares are been issued.
Partial delisting is very rare phenomena and also approval from regulatory authority is not easily obtainable.
In the past following companies have adopted this route:
Sr. No. | Name of Listed Company | Scheme particulars | Remarks |
1 | Alembic Limited | Scheme of arrangement for demerger of (i) real estate development project and related real estate interest and project management consultancy business into Shreno Limited; and (ii) Engineering division and Investment division of Shreno Limited into Nirayu Private Limited Appointed Date: November 1, 2018; Effective Date: July 26, 2019; Approving Authority: NCLT, Ahmedabad Bench | In this case, partial delisting of real estate development project and related real estate interest and project management consultancy business undertaking was achieved by issuing 7% non-convertible Redeemable preference shares to the shareholders of Alembic Limited. Further, where shareholders were non-resident, due to RBI regulatory requirement, such RPS were to be purchased immediately by promoters. Further, RPS are to be redeemed on or before 5 years from the date of allotment.
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2 | Sterlite Technologies Limited | Scheme of Arrangement for demerger of ‘Power Product and Transmission Grid Business’ of Sterlite Technologies Limited into Sterlite Power Transmission Limited; Appointed Date: April 1, 2015; Approving Authority: High Court of Bombay | In this case, partial delisting of Power Product and Transmission Grid business undertaking was achieved by giving option to shareholders as under:
i. Resident Shareholders: Option 1: Unlisted equity shares in unlisted Sterlite Power Transmission Limited; Option 2: Listed RPS at a premium of INR 110.20 in Sterlite Power Transmission Limited, with an option of seeking voluntary exit. Such RPS to compulsorily redeemed at the end of 18 months from the date of issuance at a premium of INR 123.55/-;
ii. Non-resident shareholders (other than FII): Unlisted Equity shares in Sterlite Power Transmission Limited, where, promoters to purchase such equity shares immediately upon issuance;
iii. FII: Option 1: Listed RPS in Sterlite Power Transmission Limited; Option 2: Unlisted equity shares in Sterlite Power Transmission Limited, where, promoters to purchase such equity shares immediately upon issuance;
SEBI in its observation letter specifically mentioned that scheme is detrimental to interest of resident shareholders.
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3 | Wipro Limited | Scheme of Arrangement for demerger of Diversified Business of Wipro Limited into Wipro Enterprises Limited; Appointed Date: April 1, 2012; Effective Date: March 31, 2013; Approving Authority: High Court of Karnataka
| In this case, partial delisting of diversified undertaking was achieved by giving option to shareholders to either opt for unlisted equity shares in Wipro Enterprise Limited or unlisted redeemable preference shares (‘RPS’) in Wipro Enterprise Limited. Additionally, public shareholders were given option to exchange equity shares in Wipro Enterprises Limited for listed equity shares held by promoter group in Wipro Limited. |
As from the above it can be seen only 3 companies have till now delisted their partial businesses via scheme of arrangement, owing to regulatory intervention by SEBI in this regard. Considering, listed companies have to adhere to safeguarding interests of minority shareholders, such mode is preferred very rarely by companies. However, timeline gets reduced to very great extent in such mode of delisting as it does not involve RBB process. Further, regulatory requirement also reduces for managing delisted business undertaking.
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