What is delisting?
Delisting means the removal of the stock of a listed company from a stock exchange such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). As such, you can not trade them. The entire process of delisting securities is governed by the market regulator which, in India, is the Securities and Exchange Board of India (SEBI).
A listed company’s shares get delisted from exchange for various reasons – both voluntary and involuntary. These include
- The company has an insufficient market capitalisation – likely due to an excessive fall in the stock price
- The company has filed for bankruptcy
- The company has failed to comply with the exchange’s or the regulator’s requirements
What is the fate of the shareholders in case of delisting?
If you are a shareholder of a delisted company, then you cannot sell those shares on any exchange. That being said, you can still sell them on the over-the-counter market by arranging a deal through other channels.
Let us now look at the cases of voluntary and involuntary delisting:
In this case, listed companies voluntarily opt for the removal of their securities from the stock exchange.
Some of the reasons behind voluntary delisting include:
- Mergers or amalgamation with another company
- Non-performance of the share price
If you hold shares of a company that has opted for voluntary delisting, then the company is required to give you two options under the delisting guidelines laid out by SEBI:
Sell your shares back to the company through reverse book building
In this case, the promoter or acquirer will buy back the shares through a reverse book building process. Promoters will have to publicly announce their buyback by sending out a letter of offer to eligible shareholders and a bidding form.
Thereafter, you can exit by tendering your shares. The price at which the buyback is executed is based on the price at which the maximum number of shares have been offered.
The shares tendered by the shareholders (you) must reach a specified limit, only then the delisting is considered successful. The company shall remain listed if the limit specified is not met.
Hold on to your shares until you find a buyer
If you have been unsuccessful in selling your shares through the reverse book-building process or during the exit window period, you can still hold on to them till you find a buyer in the over-the-counter market.
However, it is considerably hard to sell delisted shares as traders tend to stay away from going bullish even after such major negative events.
That being said, usually, companies voluntarily opting for delisting with some expansion-related reasons offer its investor a buyback at a premium price, leading to a significant gain for the latter.
It is important to note here that it’s just a temporary opportunity for investors to gain. Post the closing of the buyback window, the price of the stock is likely to drop.
Sometimes, while deciding the price of delisted shares, companies have to go for special voting where shareholders including retail shareholders can also participate. If the shareholders disagree on the valuation of the company at the point of delisting, the company may end up not delisting.
This category involves the forced removal of listed company shares from the stock exchange for reasons including non-compliance with the listing guidelines, late filing of reports, and low share price.
In this case, promoters are also forced to buy back the shares at a value determined by an independent evaluator. Moreover, you (the shareholders) may hold on to your shares – although the value of the shares is again highly likely to fall post-delisting.
So overall, you may consider it safe to assume that when the stocks that you own get delisted, it is better to sell them by exiting the market or selling them to the company when it announces a buyback.
There is a third, more risky option and that is holding on to the stocks expecting a revival of the company in terms of the stocks of the company getting relisted on the stock exchange – this can be possible only if SEBI permits it after setting out the guidelines for relisting such shares.
In case of relisting of voluntarily delisted stocks, the shares will have to wait at least 5 years from their delisting date to get relisted again.
On the other hand, if a company has been delisted involuntarily, it must wait 10 years before it can be listed again on the exchanges.
Here’s a quick list for your reference:
|Pentamedia Graphics Ltd||24-2-2023|
|Mefcom Agro Industries Ltd||24-2-2023|
|Sanghi Corporate Services Ltd||24-2-2023|
|Sriyansh Steel Ltd||24-2-2023|
|Vertical Industries Ltd||24-2-2023|
|Bee Electronic Machines Ltd||24-2-2023|
|Sun Source India Ltd||24-2-2023|
|Detroit Industries Ltd||24-2-2023|
|Nu Tech Corporate Services Ltd||24-2-2023|
|Geefcee Finance Ltd||24-2-2023|
|Texplast Industries Ltd||24-2-2023|
|Gangotri Iron & Steel Company Ltd||24-2-2023|
|Auroma Coke Ltd||24-2-2023|
|Global Land Masters Corporation Ltd||24-2-2023|
|TSL Industries Ltd||24-2-2023|
|South East Agro Industries Ltd||24-2-2023|
|Bluechip Stockspin Ltd||24-2-2023|
|NovaGold Petro Resources Ltd||24-2-2023|
|Sheetal Bio Agro Tech Ltd||24-2-2023|
|Dina Iron & Steel Ltd||24-2-2023|
|Ram Minerals and Chemicals Ltd||24-2-2023|
|Womens Next Loungeries Ltd||24-2-2023|
|Dwitiya Trading Ltd||24-2-2023|
|Tej Infoways Ltd||24-2-2023|
|Pincon Lifestyle Ltd||24-2-2023|
|Funny Software Ltd||24-2-2023|