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Finance Minister Jaswant Singh's move to permit a listed Indian company to invest abroad in companies traded in recognised exchanges as long as that foreign company has a 10 per cent stake in any Indian listed company, prima facie is aimed at discouraging delisting of multinational companies from the Indian bourses.
Merchant bankers are, however, sceptical whether this move will have any impact. A merchant banking head said that it would hardly matter to the MNCs whether their shares are being picked by Indian companies. A really big company would not find this an inducement enough to stay listed in India.
Sebi has already made it difficult and costlier for MNCs to delist by introducing the reverse book-building method for such transactions. Investment bankers said the FM's move could be more of a deterrent rather than dangling the carrot of investments before them.
A large number of MNCs companies have already in the process of delisting from the Indian stock markets. Sebi has not yet notified the reverse book building norms and companies are still going by the Takeover Code formula for pricing their exits.
In the last two years, close to 30 MNCs delisted their stock. The list includes Cadbury, Reckitt Benckiser, ITW Signode, Aventis CropScience, Carrier Aircon, Kodak India, Otis Elevators, Sandivik Asia, Wartsila India, Widia and Philips. Atlas Copco was the last to announce its buy-back with the intetion of delist.
About two months back Sebi had imposed tougher delisting of shares by companies through a reverse book building process.
Earlier, companies which plan to delist their shares arrived at the exit price based on the average of the preceding 26 weeks' high and low prices. Under the reverse book-building new system, shareholders can quote the prices within a band.