India may see a flurry of corporate acquisitions ending in delisting if a regulatory proposal to smoothen the process goes through, industry experts said.

A Securities and Exchange Board of India (Sebi) discussion paper released on Friday proposed a seamless process to attempt delisting when one acquires a significant stake under the takeover code. This is expected to usher in so-called ‘take private’ mergers and acquisitions (M&As) by private equity funds and foreign companies.

Currently, any acquirer wishing to delist a firm after takeover has to tackle a bewildering set of rules and procedures, many of which are contradictory. A sub-group of Sebi’s Primary Market Advisory Committee has now recommended sweeping changes, aligning these norms, the discussion paper said.

“Compliance with one body of law could bring the incoming acquirer’s holding to above 75% and perhaps even 90% (between 49% and 64% under the agreement(s) and 26% from the public shareholders); compliance with another body of law would force her down to below 75%; and the third body of law would not let the acquirer even attempt to reach 90% unless the holding is brought down to 75% (in situations where the acquirer seeks to delist under the delisting regulations, after the completion of the open offer)," the paper noted. “Such directionally contradictory transactions in a sequence pose complexity in the takeover of listed firms and dissuade an incoming acquirer from seeking to acquire control over listed companies."

The paper lays down an easier path towards delisting after an acquisition triggers an open offer. It will also end the existing practice where a delisting price is arrived at through reverse book-building. Instead, it allows acquirers to set two prices—a takeover price and a separate delisting price, which may be at a premium to the takeover price.

Sebi has invited comments on the paper till 16 July.

“PE funds and foreign strategic acquirers often want to ‘take private’ an Indian listed firm after acquiring it. The proposed framework will provide a clearer path to achieve this objective. It will make Indian listed companies more attractive for potential acquirers," said Sudip Mahapatra, partner at law firm S&R.

Experts said the proposed change in pricing mechanism is significant and will help ease delistings. “The single biggest change they are proposing now is the way the price mechanism works for delisting. Today, if you have to delist a company, you have to go through the reverse book-building process where the price is decided by the shareholders, and very often, the price expectation is fairly exorbitant, and that has resulted in many delistings failing," said Vikram Raghani, partner at law firm J Sagar Associates.

“The acquirer will be able to put out two prices, takeover and delisting price. Naturally, the delisting price will be higher, and if that delisting price is found to be fairly satisfactory by shareholders such that you cross the 90% threshold, then you can go ahead with delisting," he said.

To be sure, Raghani said the proposed pricing mechanism will be available only at the time of an acquisition, so this can be looked at as a one-time dispensation for the acquirer.