The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a dedicated and simplified framework for the voluntary delisting of Public Sector Undertakings (PSUs) where the government or promoter group holds 90% or more of the company’s shares

SEBI Proposes Special Delisting Route for PSUs with 90% Government Holding

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a dedicated and simplified framework for the voluntary delisting of Public Sector Undertakings (PSUs) where the government or promoter group holds 90% or more of the company’s shares. This move aims to address the unique challenges faced by PSUs under the current delisting regulations and facilitate the government’s strategic disinvestment plans.

Key Features of the Proposal

Eligibility: Only PSUs where the aggregate shareholding of the government/promoter group and other PSUs equals or exceeds 90% of the total issued shares will be eligible for this special delisting mechanism.
Exemption from Public Shareholding Norms: Eligible PSUs can delist without having to comply with the minimum public shareholding requirement, which typically mandates at least 25% public ownership in listed companies.
Fixed Price Exit: The delisting can occur at a fixed price, set at a minimum of 15% premium over the regulatory floor price, regardless of whether the shares are frequently traded or not. This is a significant shift from the current reverse book-building process.
Removal of Shareholder Approval Requirement: The proposal suggests abolishing the existing requirement for two-thirds public shareholder approval in cases where the government/promoter group already holds 90% or more.
Pricing Mechanism: The exit price for public shareholders may continue to follow the existing SEBI pricing formula-based on market price, book value, and other financial metrics. Alternatively, an independent valuer could be used to determine the price using methods like book value, trading multiples, and discounted cash flow.
Handling Unclaimed Money: Any unclaimed money from the delisting process will be transferred to the stock exchange for seven years, after which it will move to the Investor Education and Protection Fund (IEPF). Investors can claim their funds during this period.

Rationale Behind the Move

SEBI highlighted that many PSUs have low public shareholding, outdated business models, or weak future prospects. Despite this, their market prices can remain high due to government backing, making delisting financially burdensome for the government under the current rules. The proposed carve-out aims to streamline the process, reduce costs, and provide regulatory clarity for PSU delisting, thereby supporting the government’s broader disinvestment strategy.

Public Consultation

SEBI has invited public comments on the proposed framework until May 26, 2025, seeking feedback from all stakeholders before finalizing the new rules.
This proposal, if implemented, could significantly ease the exit process for the government from select PSUs, balancing the interests of public shareholders with the need for efficient disinvestment.

Read more :