Given the significant number of failed delistings in India over the past few years, SEBI's August 2023 consultation paper had proposed certain amendments to the delisting framework. However, SEBI surprisingly decided to defer the implementation of these changes at its November 2023 board meeting, citing the need to assess more data.
Our team analysed core voluntary delisting trends in India from 2018 to 2023. Although the year wise comparison data shows more successful than unsuccessful delistings, the data is skewed by the higher success rate of small-cap companies, which usually involve relatively low financial outlay for the acquiring promoter. By contrast, there are hardly any well-known instances of successful delistings of mid and large cap companies during this period. The data clearly shows that the most common reasons for failure of delisting offers were insufficient demand from public shareholders and the discovered price being at a significant premium to the floor price.
The changes previously proposed by SEBI were aimed at addressing these very demand and pricing uncertainties highlighted by already available delisting data. It now remains to be seen what further data SEBI needs to assess before deciding to make much-needed changes to the delisting regime.
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