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India market regulator to cut number of listed firms

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Staff writer ▼ | May 27, 2016
The capital market regulator intends to reduce the number of listed companies to curb the risk of price manipulation through entities that are not actively traded.
Asia   To curb the risk of price manipulation
The Securities and Exchange Board of India (SEBI) will also increase oversight of auditors and take action against them if they are found to have abetted market manipulation.

Both steps are intended to improve the governance of public markets and companies listed on them. Outlining the priorities for 2016-17, SEBI chairman U.K. Sinha said the regulator will significantly reduce the number of listed entities over the course of this year.

For a start, SEBI will ask companies that have been suspended from trading for seven years to delist from the exchanges by giving an exit option to investors. Such companies are typically suspended from trading for non-compliance with rules. Technically they are still listed and hypothetically they can start trading again if they become compliant.

The exit option will be provided by setting a fair value for the shares. This fair value will be determined by a third-party valuer. There are about 1,200 such entities, Sinha told journalists.

In a second step, companies listed only on regional stock exchanges will also be asked to delist. About 500 companies have moved from regional exchanges to national exchanges; a number of regional exchanges have been shut down.

The ones that did not could be asked to provide investors an exit option and delist, said Sinha, adding that the exit option would be provided via the fair value method. There are about 3,000 such companies.