The revised standards for related party transactions will broaden the scope of the review and limit the ability of large shareholders – often the founding family or promoters – to enter into such transactions without the approval of minority shareholders. This should strengthen the corporate governance of listed companies, he said.
The delisting changes should facilitate greater transparency and more effectively balance the interests of acquirers and public shareholders. They should also result in faster execution, Fitch added.
“Recent changes by the Securities and Exchange Board of India (Sebi) will tighten the rules governing related party transactions (RPT) and facilitate the delisting process,” Fitch Ratings said in a statement.
Last month, Sebi broadened the definition of related party transactions and decided to facilitate delisting of acquirers’ shares after a takeover bid.
The revised write-off rules will allow an acquirer to announce its intention to write off the target company and disclose both the open offer price and the premium over the write-off price.
Fitch said that if a sufficient number of shareholders choose to tender their shares, so that the delisting threshold of 90 percent of the shares is reached, then they will receive the delisting price. Alternatively, if the 90 percent threshold is not met in the open bid, then only the open bid price will be paid and the acquirer will have 12 months to complete the delisting or reduce its stake to 75 percent. to comply with the listing rules.
“This greatly reduces the uncertainty in the price discovery process for both parties compared to the current process,” added Fitch.