SEBI mulls carving out separate mechanism for voluntary delisting of PSUs

Markets regulator SEBI on Tuesday proposed carving out a separate mechanism for the voluntary delisting of PSUs, where the government or promoter group owns 90% or more of shares.

Under current rules, delisting is successful if promoter shareholding reaches 90%. Moreover, the floor price for delisting is calculated using several pricing metrics such as the 60-day average price and the highest price in the last 26 weeks.

These rules can make delisting costly for PSUs due to high market prices despite low book values or weak financials.

In its consultation paper, SEBI noted that many PSUs have low public shareholding, outdated business models or weak future outlooks and higher market prices due to government ownership than actual value. These make them financially burdensome for the government to delist such companies.

In view of these drawbacks and to facilitate the delisting of such PSUs, SEBI has proposed that a separate carve-out for voluntary delisting should be created.

Under this, SEBI proposed that "only those PSUs, whose aggregate shareholding of promoter/promoter group along with the other PSUs equals or exceeds 90% of the total issued shares of the company, may only be eligible for delisting through this separate carve out mechanism".

Further, these PSUs can delist without meeting minimum public shareholding norms.

SEBI suggested that delisting can happen at a fixed price—at least a 15% premium over the floor price—regardless of trading frequency.

It proposed to abolish the requirement for two-thirds public shareholder approval in cases where the promoter plus PSU holding is already 90%.

On exit price to the public shareholders, the regulator suggested continuing with the current SEBI pricing formula based on market price and book value, among others.

Alternatively, use an independent valuer to determine the price based on book value, comparable trading multiples, discounted cash flow method and other industry-specific metrics.

With regards to handling unclaimed money, SEBI suggested that such money should be transferred to the stock exchange for 7 years and then moved to the Investor Education and Protection Fund (IEPF) or the regulator's IPEF.

Further, investors can claim the amount during this period.

The Securities and Exchange Board of India (SEBI) has sought public comments till May 26 on the proposals.