Multinational companies that were harbouring hopes to delist their stock from Indian bourses have received a setback following last week’s announcement of tougher rules by the Securities and Exchange Board of India (Sebi).

Markets have been speculating on the possible delisting by Novartis India, Pfizer India, Ciba India, Oracle Financial Services (formerly i-Flex), Ingersoll Rand (India), Bosch and Blue Dart Express. Experts say the new rules wil make it difficult for these companies to delist.

The new rules allow delisting only if the votes cast by public shareholders are at least 2:1 in favour of a special resolution for the purpose.

Also, an offer will be considered successful if it takes the promoter holding beyond 90 per cent of the issued capital (excluding shares held by a custodian and against which depository receipts have been issued abroad), or the sum of the pre-offer promoter stake and 50 per cent of the offer size, whichever is higher.

This means that if the pre-offer promoters’ stake is 87 per cent and public shareholding 13 per cent, they are required to get at least half of the public stake through the offer to be able to exit the stock exchange. Simply put, new Sebi rules say the promoters’ stake must go up to at least 93.5 per cent (and not just over 90 per cent as earlier) to be able to delist.

Novartis AG’s open offer to acquire 39 per cent in its Indian arm ended last week. If successful, it will take the Swiss parent’s stake above 90 per cent, making them eligible for delisting under earlier rules. “However, after the new rules, Novartis will find it difficult to delist their stocks,” said an investment banker, requesting anonymity.

Added Amrish Shah, executive director, PricewaterhouseCoopers (India), “The new rules favour minority shareholders. Delisting has been made cumbersome for corporate India.”

Promoters led by Pfizer Corporation hold 41.23 per cent in Pfizer India. Under old rule, the US parent needed to buy another 33.78 per cent to reach the delisting threshold. Now it will require buy 48.77 per cent.

“It will be tough for not just multinational companies, but for any company to delist after the new rules. The fact that votes cast by public shareholders in favour of delisting must be at least twice the number cast by them against it will be a tough ask,” said Girish Nadkarni, executive director of Avendus Capital, a Mumbai-based investment bank.

Several blue-chip MNCs have delisted from Indian stock markets in the past and include e-Serve (bought by Citigroup and later sold to TCS), OTIS, Wartsila, Reckitt Benckiser, Philips, Aventis CorpScience, ITW Signote and Cadbury.

MNC drug companies that have delisted from the Indian stock markets include Parke Davis and Pharmacia Healthcare following their merger with Pfizer in 2004 and 2006, respectively.

Burroughs Welcome (India) was delisted in 2005 following its merger with the UK-based Glaxo SmithKline Pharmaceuti-cals. SmithKline Beecham Pharmaceuticals (India) was delisted in 2002, after its merger with Glaxo India as part of the Glaxo-SmithKline global merger.

Among Indian drug makers, American Remedies was delisted following its acquisition by Dr Reddy’ Laboratories and Bombay Drug and Pharma was delisted following its amalgamation with Strides Arcolab.