Why Indian promoters are no longer rushing to delist

Fewer Indian companies are choosing to delist from stock exchanges, as buoyant market valuations and tighter pricing rules have made share buybacks increasingly expensive for promoters. Voluntary delistings peaked at 47 in FY19 before declining to 45 in FY22, 22 in FY23, 24 in FY24, and just 12 in FY25, the lowest in at least a decade, according to a Mint analysis of exchange data. Since FY21, 272 companies have listed on Indian exchanges, underscoring a broader trend: public markets are attracting more companies than they’re losing. Also Read | NSE frenzy shows no sign of ebbing in unlisted market Delisting decisions are typically strategic, unlike initial public offerings (IPOs), which are timed to market cycles. A promoter may choose to delist a company to regain full control, to consolidate ownership after a private equity buyout, or to exit costly compliance obligations, especially in cases where trading volumes are low. In some cases, companies are forced to delist due to non-compliance, though these are treated as compulsory delistings. But even voluntary delistings have become harder. First, India’s post-pandemic bull run pushed up share prices across the board. Since the delisting floor price is tied to historical trading averages, promoters are now expected to offer a significant premium above already-elevated levels. “The main reason for promoters to not go ahead with delisting is on account of the bull market valuation," said Anand Lakra, partner at JSA Advocates and Solicitors. “The expectation from shareholders is to obtain a high premium to the floor price, which is already high in a bull market and is causing the promoters not to embark on the delisting process." The Nifty 50’s 10-year average price-to-earnings ratio was at 22.89x till its September 2024 peak and currently stands at 23.37x. Delisting in India requires the company’s promoter to buy back all public shares. Until recently, this process relied mainly on the reverse book building (RBB) method, in which shareholders name the price at which they’re willing to tender shares—often well above the floor or indicative price. But the RBB system frequently ran into trouble when institutional investors demanded steep premiums, citing hidden value in unlisted assets or real estate. “The RBB system was often ineffective, especially when large investors quoted very high prices, knowing that the company held valuable assets not reflected in its traded stock price," said Arindam Ghosh, partner at Khaitan & Co. “As a result, many delisting offers either failed or became too expensive for promoters to accept." One prominent example was Vedanta Ltd’s failed delisting in October 2020. The company’s promoters offered ₹87.5 per share to buy out public shareholders, but the bid failed after they didn’t receive the minimum required acceptance. Media reports indicated shareholder bids went as high as ₹320 per share, making the offer financially unviable. To address these concerns, the Securities and Exchange Board of India (Sebi) introduced the adjusted book value (ABV) method in September 2024 to calculate the floor price for delisting. This method factors in unlisted subsidiaries, real estate and other hidden assets—often leading to valuations higher than what the public markets reflect. “While this ensured a more accurate reflection of the company’s true worth, in certain cases it further raised the floor price and made delisting even more financially burdensome for promoters," said Ghosh. “Instead of simplifying the process, it appears this has led to fewer delisting offers, as promoters now face much higher payout obligations to exit the public markets," he added. Simultaneously, Sebi also introduced a fixed-price delisting option, alongside the existing reverse book building process. Under this route, promoters can offer to buy back all public shares at a fixed price that is at least 15% higher than the floor price. “However, in certain cases the adjusted book value method had already pushed the floor price higher, which means more money for the promoter to shed, the new mode has not really picked up," said Ghosh. The case for staying public For some companies, delisting was once seen as a way to cut compliance costs and regulatory overhead. “One of the reasons why companies choose to voluntarily delist is the compliance burden that comes with being publicly listed," said V Prashant Rao, director and head of equity capital markets at Anand Rathi Investment Banking. “Firms with limited resources often struggle to meet quarterly reporting and other regulatory requirements, making the associated costs difficult to justify." But this mindset is evolving. Many promoters now see long-term upside in staying listed. “Companies—both foreign and domestic—are recognizing the long-term value of remaining listed," said Bhavesh Shah, managing director and head of investment banking at Equirus Group. “India’s capital markets are in a sweet spot, flourishing with robust investor participation and strong backing for quality businesses. This is creating a powerful platform for sustained value creation and companies do not mind doing the compliance part to remain listed." “Delisting now would mean opting out of that journey and denying stakeholders the opportunity to participate in the upside," he added. A generational shift in promoter mindset may also be playing a role. “A new generation of promoters has emerged replacing older decision-makers and bringing a fresh perspective that views the capital market as a key opportunity for growth," said Tarun Singh, managing director and founder at Highbrow Securities. “The Indian economy has stabilized over the past 10-15 years with a lower volatility seen in the markets as before. This, along with a steady inflow of new investors, has created an encouraging environment for companies to remain listed rather than exit the market," he added.