SEBI proposes easier delisting rules for low-float PSUs
Securities and Exchange Board of India (SEBI) has proposed a separate carve-out for voluntary delisting of public sector undertakings (PSUs) where the government holding is over 90 percent. Such PSUs may be allowed to be delisted without the requirement of complying with the minimum public shareholding norms, which mandate 25 percent holding by the public in a listed entity. The mandate for two-third shareholder approval for delisting may also be removed.
As per the proposals in the consultation paper, eligible PSUs may be delisted through a fixed price delisting process, irrespective of whether the shares are frequently traded or not. However, the fixed delisting price will be at least 15 percent premium over the floor price. As per SEBI, certain PSUs, which have thin public float or poor financials, may not have any future due to outdated product lines or government’s decision to sell off their assets. While these companies may not have a strong future, they can still be traded at a heightened market price given the investors’ confidence with regards to risk and security on account of government holding. SEBI feels that such sentiments may lead to a higher floor price which in many cases may not be reasonable with the book value.
Further, in delisting of such PSUs, the amount lying in the escrow account or the bank guarantee meant for the remaining public shareholding will be transferred to a stock exchange. The amount will be held for at least seven years during which investors can claim, following that it will be transferred to the Investor Education and Protection Fund (IEPF).
The Consultation paper is open for comments till 27th May, 2025.
