The new delisting norms, which require the participation of at least 25 per cent of public shareholders for the process to be successful, will ensure that promoters make a "very honest attempt" to reach out to investors, Sebi chief U K Sinha said on Saturday.
Ruling out any possibility of having a re-look at the new delisting norms that were approved by the Sebi board earlier this week, Sinha said the regulations would help address irregularities in the whole process.
"My feeling is that it will incentivise, it will force the promoters to make a very honest attempt to reach out to shareholders. I am sure if they do that some of them will succeed," Sinha told reporters in New Delhi.
When asked whether there would be a re-look at the new norms on 25 per cent public shareholding tendering in a delisting process, as there is a perception it would adversely impact delisting activities, Sinha said, "not at all".
Delisting would be considered successful only if at least 25 per cent of the public shareholders participated in the reverse book building process, as per the new norms of Securities and Exchange Board of India (Sebi).
The 25 per cent public shareholding that have to be tendered in a delisting process has to be in demat form.
Sinha said there are stories that some of the people were trying to have side deal with promoters if they wanted the delisting to succeed.
"On the other side, there were instances where promoters were able to corner some shares through their friendly shareholders or friendly intermediaries and even with two shareholders, five or ten shareholders in a company, where there were thousands of investors, they were able to do it," he said.
Sinha was speaking to reporters after inaugurating Bombay Stock Exchange's (BSE) new investor service centre in New Delhi.
There have also been instances when only two shareholders have been able to tender the shareholding and the delisting have succeeded.
"I think it is a fraud. If you have hundreds of thousands of shareholders, and just two of them come together and the shares get delisted, it is definitely against the interests of vast majority, super majority of shareholders," Sinha said.
Acknowledging that there was a defect in Sebi regulations efforts have been made to control the irregularities.
"One irregularity was on the side of certain smart investors who were cornering shares prior to or immediately after the announcement and they were able to dictate the price because our price fixation mechanism was, if I can say, defective. We have corrected that now," the Sebi chief said.
On when the new norms would be effective, Sinha said it would not take too much time.
"Normally it takes about a couple of months for our regulations finally drafted and vetted," he added.