MNC delisting plans get a jolt; APW President's offer also fails

MUMBAI: In a move that could set the alarm bells ringing for multinational companies keen on de-listing their Indian subsidiaries to avoid Sebi’s minimum public shareholding norms, the voluntary delisting of a third MNC failed as the premium offered by its promoters was insufficient to attract minority shareholders.


On Tuesday, electrical board maker APW President joined the ranks of French MNC Saint-Gobain Sekurit and office equipment maker Ricoh India after investors tendered just 44% of the required quantity of shares to help it delist. Of the total tendered shares, 56% were quoted below the discovered price — that at which a maximum number of equity shares were tendered during reverse book-building — of Rs 250 a share. “Though the company has posted losses over the past several quarters, the promoters offered shareholders an opportunity to exit at a decent price. However, a group of investors wanted a huge premium, which was unaffordable,” said a banker to the offer.

APW shares have declined by 42% to Rs 132.50 apiece on Tuesday since the announcement of delisting on December 14. Unresponsive shareholders have been the main reason for the failure of the past few voluntary delisting attempts by promoters. But, this could also prove to be a bother for promoters of companies wanting to delist for complying with the 25% public shareholding norm by June 2013. These companies, said market experts, may now have to opt for an offer for sale or private placement over delisting to meet Sebi norms.

“Companies which don’t have to meet Sebi’s shareholding norm won’t be under pressure to delist at a high premium, but those which have to delist may be left with little opportunity than to opt for an OFS or placement under the current circumstances,” Dara Kalyaniwalla, VP, investment banking at Prabhudas Lilladher. “A cartel of investors who enter the counter of companies on expectation of a delisting, demand huge premiums,” Kalyaniwalla added.

One such company was USbased speciality steel manufacturer Timken, which on Tuesday dropped the idea of delisting its Indian subsidiary and opted instead for reducing its stake to comply with minimum public holding norms. It has yet to announce the mode of raising the company’s public float.

A company in India can be delisted if a buyback offer results in the promoter holding exceeding 90%, or the promoter acquiring at least 50% of the public holding, whichever is higher.

The price is determined by investors through the reverse book-building, where they indicate prices at which they are willing to sell. The promoters of APW President Systems had come out with a delisting offer to acquire up to 15.12 lakh shares, representing 25% of the equity capital of the company, from the public shareholders for the voluntary delisting.