InvestorQ : Why are companies trying to aggressively delist in this year? I am told we have seen highest ever delisting proposals in the current fiscal year 2020-21?
Priyanka N made post

Why are companies trying to aggressively delist in this year? I am told we have seen highest ever delisting proposals in the current fiscal year 2020-21?

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Neelam Naik answered.
1 month ago
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A recent report by Prime Database of Prithvi Haldea has reported that the total amount offered by majority shareholders to delist and take their companies off the stock exchanges stands at the highest level in the last 17 years. In FY21, so far, the value of such delisting offers stands at a whopping Rs.22,166 crore. The previous highest expression of intent at Rs.5479 crore happened in FY16, and this already 4 times that number.

In the delisting process, the majority shareholders or promoters buy back shares from the public to delist the stock and take the company off the stock market. This is something akin to what Vedanta had attempted recently, but could not succeed as its largest minority shareholder LIC was not agreeable to the price offered. The report has pointed out that most delisting proposals were actually made during the crash of early 2020.

Vedanta’s delisting bid in May 2020 accounted for the bulk of the amount on offer. Of course, in October 2020, Vedanta opted to give up the idea of delisting leading to a huge fall in the overall success ratio during the year. In all, there here have been 14 such offers during the year including the most talked about Vedanta offer. Normally, the investors who have been stuck for a long time, prefer to exit as part of the delisting offer.

Two other well-known delisting stories were of Hexaware and Adani Power. Hexaware announced a successful delisting in September 2020. It acquired a total of 8.7 crore shares at an attractive delisting offer price of Rs 475 per share. This accounted for the bulk of the money actually spent on delisting during the current fiscal year. Adani Power will be acquiring shares at Rs.33.82 and spend Rs.3000 crore to delist the stock from bourses.

Recently, in a consultation paper, SEBI has proposed some changes including shorter timelines for concluding the offer and making it mandatory for promoters to accept the delisting price if it is the same as the minimum price given earlier. This is expected to hopefully iron out some of the issues in the delisting process. However, the aggression in pricing will remain the key issue in any delisting.

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