The Securities and Exchange Board of India (SEBI), in its board meeting on June 18, 2025, approved several proposals aimed at enhancing the ease of doing business in India. One of the key proposals pertains to the voluntary delisting of Public Sector Undertakings (PSUs).
Delisting of listed companies has traditionally been a complex process due to factors such as:
- The reverse book-building mechanism,
- The 90% shareholding threshold,
- The inability to mandatorily squeeze out public shareholders post-delisting,
- Premiums over the traded price of shares.
To simplify the delisting process for PSUs, SEBI has introduced certain relaxations. It noted that the traded share prices of some PSUs may not reflect their true book value due to various economic and industry-specific factors. Therefore, it is essential that the base price (i.e. floor price) for delisting is not linked to the market price of the shares.
Key Proposals for PSU Delisting:
- Eligibility: Only PSUs where the Government of India and/or other PSUs hold at least 90% of the shareholding are eligible to avail the relaxations.
- Fixed Price Mechanism: Delisting will be conducted through a fixed price process, with the offer price being at least 15% above the floor price.
- Floor Price Determination: The floor price will be based on a joint valuation report by two independent registered valuers, considering multiple parameters. The traded market price will not be a required input in computing the floor price.
- Shareholder Approval: The requirement for a two-thirds majority approval from public shareholders has been removed.
This is a welcome move and may encourage eligible PSUs to consider delisting. However, the number of PSUs meeting the eligibility criteria may be limited.