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Informist, Tuesday, May 6, 2025

--SEBI issues consultation paper on PSU delisting with 90% govt holding

NEW DELHI - The Securities and Exchange Board of India Tuesday issued a consultation paper that proposes to carve out an exception for voluntary delisting of public-sector undertakings where the government holding, along with the holdings of other public-sector companies, is 90% or higher. The market regulator wants to exempt these government-owned companies from having to comply with the existing rules for fixing the floor price for voluntary delisting, and to come up with alternatives.

For frequently traded shares of a company desiring to delist voluntarily, the current rule for computing the floor price below which the shares cannot be delisted, says the floor price has to be above the volume weighted average market price for the preceding 60 days. In cases where the shares are not frequently traded, the rule requires the floor price to be arrived at by an independent registered valuer. This, according to SEBI, "will result into higher floor price and consequently result into higher budgetary outlay for the Government", since the government ownership of these companies offers less risks and more security for investors and leads to increased market price.

SEBI did not lay out any alternative parameters for determination of the floor price in the consultation paper, but it will consider comments it receives from investors, companies, and market participants. The market regulator said comments should come not later than May 27.

Apart from the floor price relaxation, SEBI has proposed that eligible public-sector undertakings be allowed to delist even if they are not in compliance with the requirement of having public shareholding of at least 25%. The market regulator is also considering exempting these companies from the requirement of seeking the approval of two-thirds of their public shareholders to delist. SEBI said the Securities Contracts (Regulations) Rules, 1957, may have to be amended as this requirement stems from there.

SEBI had recently diluted its delisting rules by giving companies an additional option to the reverse book-building mechanism where investors determine the exit price. A fixed-price delisting option was given by SEBI where a company could delist its stock at a 15% premium over the floor price. Tuesday's consultation paper proposes that the same option be provided to eligible public-sector undertakings.  End

Reported by Rajesh Gajra

Edited by Rajeev Pai

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