Delisting of Shares in India: Key SEBI Rules and 10 Important Points for Shareholders

Team L&M

Delisting refers to the removal of a company’s equity shares from a stock exchange, making them no longer available for public trading. In India, the delisting of shares is regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Delisting of Equity Shares) Regulations, 2021. Understanding the delisting process in India is crucial for investors, as it directly impacts their ability to trade and exit investments.

As per SEBI regulations, a company must first obtain shareholder approval through postal ballot or e-voting, along with in-principle approval from the stock exchanges. This is followed by a detailed public announcement and letter of offer. Once issued, the reverse book building (RBB) process begins, allowing public shareholders to tender their shares and determine the final delisting price.

Delisting Process in India: 10 Key Points Shareholders Must Know

1. Eligibility to Participate

All public shareholders holding shares in demat or physical form are eligible to participate in the RBB process after receiving the letter of offer.

2. Public Announcement & Offer Timeline

After regulatory approvals, the acquirer releases a public announcement and letter of offer. Shareholders typically get five working days to bid their shares.

3. Shareholder Approval Requirement

For delisting to proceed, votes in favour must be at least twice the votes against from public shareholders, ensuring strong investor backing.

4. Reverse Book Building (RBB) Mechanism

The RBB process enables shareholders to quote their desired exit price. The final delisting price is discovered based on these bids.

5. Floor Price vs Final Price

The floor price is the minimum offer price calculated as per SEBI norms. However, the final price is determined through shareholder participation in RBB.

6. Tax Implications on Delisting

Gains from share sale during delisting are subject to capital gains tax in India, applicable to both residents and non-residents.

7. Short-Term vs Long-Term Capital Gains

• Shares held up to 12 months: taxed at 15% (STCG)
• Shares held beyond 12 months: taxed at 10% (LTCG) on gains exceeding ₹1 lakh

Additional surcharge and cess may apply as per current tax laws.

8. Impact on Non-Participating Shareholders

If shareholders do not participate in the delisting offer, their shares become unlisted, which may lead to different (often higher) tax implications.

9. Conditions for Successful Delisting

The delisting is successful only if the acquirer’s shareholding reaches 90% or more of total equity share capital.

10. Exit Window After Delisting

Even after successful delisting, remaining shareholders can tender their shares within a one-year exit window at the discovered price, although authorities treat these shares as unlisted for tax purposes.

Premiums and Investor Opportunity in Delisting

Historically, successful delisting offers in India have provided premium returns ranging from 10% to over 200% in some cases. This makes delisting an important event for investors to evaluate carefully and participate strategically.

Conclusion