What is Delisting
• It is the process of removing securities of the listed companies from a stock exchange
• It is also known as the Reverse Book Building Process.
• After the completion of the delisting process, the securities of that particular company will
no longer be traded on that stock exchange.
Definition of Delisting
Delisting involves removal of listed securities of a company from a stock exchange where it
Is traded on a permanent basis.
Description: Delisting curbs the securities of the delisted company from being traded on the
stock exchange. It can be done either on voluntary decision of the company or forcibly done
by SEBI on account of some wrong doing by the company. There are certain norms which a
company needs to follow while listing on the stock exchange.
In case the company fails to do so, then SEBI takes the action which generally leads to
delisting of the company from the stock exchange.
Corporate are now aiming at reducing costs, which do not have any returns. Payment of
listing fees to the stock exchanges today is considered by some Companies as a burden
because the companies feel that neither the shares are traded on the stock exchanges nor the
exchanges provide any value added service to the companies. The Company has an option to
delist any or all class of securities. There is no restriction as to class of securities. However, a
Company is not allowed to delist its securities through Buy-back.
Types Of Delisting
Broadly, delisting of securities may be of two types:
1. Voluntary Delisting : delisting of securities of a body corporate voluntarily by a
promoter or an acquirer or any other person other than the stock exchange(s), i.e., a
listed Company seeks delisting of securities on its own motion.
2. Compulsory Delisting : a listed Company is compelled by the Stock Exchange to
delist its securities
‗Promoter‘ means a promoter as defined in clause (h) of sub-regulation (1) of Regulation 2 of
the Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers)
Regulation, 1997 and includes a person who is desirous of getting the securities of the
company delisted under Securities And Exchange Board Of India (Delisting Of Securities)
Guidelines – 2003
Need Of Delisting
1. Relinquishing control through sale.
2. Regulatory Demands.
3. Changing Investor Profile and funding patterns.
4. Emergence of National Exchanges.
5. Lack of trading volume in regional exchanges.
6. Compliance and disclosure requirements.
7. Administrating and cost of servicing large shareholder base.
Causes Of Compulsory Delisting
1. Non payment of listing fees.
2. Non compliance with listing requirements and listing agreement.
3. Non redressal of investor‘s complaints despite repeated reminders.
4. Unfair trading practices at the behest of the promoters/ management.
5. Other malpractice such as fake, original or duplicate share certificates deliberately
issued by the management.
6. Whereabouts of the Company / or its Promoters / Directors not known
7. Reduction in the number of public holders of securities.
Causes Of Voluntary Delisting
1. A Listed Company finds the listing fees payable to the stock exchanges burdensome
and disproportionate to the benefits accruing to the company or its stock holders.
2. Regional imbalance of the holders of the securities either due to shifting of the
companies registered office and / or location of manufacturing unit, or for any other
3. Negligible trading or total absence of trading for a considerable long period of time.
4. The company has either suspended its business or is under closure or has become sick
5. Small capital base or failure to comply with the requirement of increasing the capital,
not justifying listing to be continued.
6. Mergers, Amalgamations, Takeovers, etc.
SEBI Guidelines For Delisting
• The exit price for delisting should be in accordance with the book-building process.
• The offer price should have a floor price (a minimum base price) which will be the
average of 26 weeks traded price and without a maximum price.
• Market forces will determine the price above the base price. Stock exchanges will
provide the infrastructure to ensure transparency whereby investors can see the prices
• To reduce risk of price manipulation, the scrip will be under watch by the
• Comprehensive provisions should include procedures governing the entire subject of
delisting of securities of companies, and should cover cases in which companies on
their own seek delisting of their securities from all or some of the stock exchanges
Conditions Of Voluntary Delisting
Listing for minimum period of 3 years at any stock exchange.
An exit opportunity has been given to the investors for the purpose of which an exit
price shall be determined in accordance with the ―book building process‖. However,
an exit opportunity need not be given in cases where securities continue to be listed in
a stock exchange having nation wide trading terminals.
(Explanation: Stock exchange having nationwide trading terminals means the Stock
Exchange, Mumbai, the National Stock Exchange and any other stock exchange, which may
be specified by the Board.)
Procedure For Delisting Of Securities
The following procedure is to be followed for voluntary delisting of securities from the Stock
1. BOARD APPROVAL
Convening a meeting of the Board of Directors of the Company after issuing a notice
preferably in writing to all the directors of the Company in accordance with the provisions of
Sec. 286 of the Companies Act, 1956 and to pass a resolution on the following:
(a) proposal for delisting the shares of the Company.
(b) for convening General Meeting for obtaining the consent of the members by way of a
special resolution and fix up the date, time, place and agenda for convening the same. The
agenda can be included in the Annual General Meeting also.
2. INTIMATION TO STOCK EXCHANGES:
Immediately after the Board Meeting, a certified copy of the Board Resolution proposing the
delisting of the securities from the said Stock Exchange is to be submitted to the required
Stock Exchange. Similarly, two copies of the notice of the general meeting is also to be sent
to the Stock Exchanges.
3. MEMBERS APPROVAL:
The notice convening the General Meeting is to be sent in writing at least twenty-one clear
days before the date of the meeting to the shareholders of the Company. Suitable Explanatory
Statement as provided under Sec.173 (2) of the Companies Act, 1956 is to be attached to the
The General Meeting is to be held on the given date and the Special Resolution referred
above is passed. The Companies (Passing of resolution by postal ballot) Rules, 2001 are not
applicable for delisting of securities from Stock Exchanges. Accordingly, the Special
Resolution has to be passed in the conventional manner only in Extra Ordinary General
Meeting or Annual General Meeting.
4. FILING OF FORMS WITH THE REGISTRAR OF COMPANIES :
Within thirty days of passing the Special resolution, the Company is required to file Form
No. 23 of the Companies (Central Government`s) General Rules & Forms, 1956 with the
concerned Registrar of Companies, enclosing a certified copy of the resolution, explanatory
statement and the notice of such meeting along with the payment of the requisite fee as
prescribed under Schedule X to the Companies Act, 1956 either by way of cash, demand
draft or treasury challan.
5. PUBLICATION OF NOTICE IN NEWS PAPERS:
The Company desiring to delist the securities shall publish a notice in newspapers (one in all
India English Newspaper and one in regional language newspaper of the region) with detailed
explanation and justification for the proposed delisting. A copy of the notice shall be filed
with the stock exchange.
6. EXIT OPPORTUNITY TO SHAREHOLDERS OF THE REGION:
The holders of the securities in the region where the concerned stock exchange is located
should be given an exit opportunity requiring the promoters or those who are in the control of
the management of the Company to buy or to make arrangement for buying the securities of
Hence, the Company shall identify the promoter(s) or persons having control of the
management of the Company who is or willing to buy the securities. An undertaking from
such person(s) to buy the securities shall be submitted to the Stock Exchange.
7. PURCHASE PRICE:
The price at which the shares are to be bought shall not be less than the weighted average of
the traded price of the security in the preceding six months at any of the Stock Exchanges on
which the securities are listed and where the highest of the volume of the securities was
In case there was no trading at any of the Exchanges during the preceding six months, the
price for the purpose of buying of the securities should be a fair price to be computed by the
Auditors of the Company. The Company shall submit a certificate from the Auditor certifying
that the price has been fixed as per SEBI Guidelines, giving the details of calculation.
8. SUBMISSION OF LIST OF SHAREHOLDERS TO STOCK EXCHANGE:
The Company desiring to voluntarily delist the shares shall submit a complete list of the
shareholders of the region, duly certified by the Auditor and / or Registrar and Transfer Agent
and / or Managers to the offer, where the concerned Stock Exchange is located and from
which the company is seeking delisting.
Where no shareholder resides in the region of the concerned stock exchange the company
should furnish the certificate of its registrars and transfer agent and of Managing Director
/Company Secretary /Auditors of the company or practicing company secretary to that effect.
9. RECORD DATE:
The Company shall fix a Record Date to determine the shareholders of the region to whom
the offer letters are to be sent and the same shall be intimated to the Stock Exchange.
10. OFFER TO BUY SHARES:
The Company shall send a circular / letter of offer to each and every share holder of the
regional stock exchange from which the securities are proposed to be delisted. The circular /
offer letter shall contain all details viz., back ground of the persons) who is / are buying the
shares, where the share certificates are to be sent, offer price, details of payment, detailed
explanation and justification for the proposed de-listing etc.
11. AUDITOR/RTA’S CERTIFICATE:
The Company shall obtain a certificate from the Auditors/Share Transfer Agent that the
Circular/Letter of Offer has been dispatched to all the shareholders of the concerned region
before the opening date of the offer and send the same along with two copies of the
Circular/Letter of Offer to the Stock Exchange(s) from where the securities are proposed to
12. MINIMUM PERIOD FOR OFFER TO BUY:
The offer to buy the securities as aforesaid shall be kept open for a minimum period of 30
days similar to that of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
13. MANNER OF PAYMENT FOR SHARES BOUGHT BACK:
The consideration amount shall be calculated and the entire amount shall be kept in a
separate bank account (Escrow Account) before the opening of the offer. A certificate from
the Auditor to this effect shall be submitted to the Stock Exchange before the opening of the
offer. The promoter(s)/person(s) who is /are buying the securities can make use of the
balance amount after the payment of the consideration amount to the shareholders from
whom the shares have been accepted, only after all the formalities are completed, including
the transfer of shares.
14. TIME LIMIT FOR PAYMENT OF SHARES BOUGHT BACK:
All the formalities in connection with the offer including the payment of consideration and
transfer of securities shall be completed with in 30 days from the date of the closure of the
offer. The Company shall also furnish the details of the response received for the said offer
viz., number of shares for which offers have been received, rejection if any, number of shares
15. AUDITOR’S CERTIFICATES REGARDING PAYMENT etc.:
The Company shall submit a certificate from the statutory auditors of the Company
certifying that the consideration amount has been paid and all transfers have been effected.
Similarly, the Company shall furnish another certificate from the Statutory Auditors that the
company has complied with all the requirements, SEBI guidelines and Stock Exchange
procedures in connection with the purchase of the aforesaid shares.
In case the aforesaid purchase of shares results in purchase of shares in excess of the limits
prescribed under the SEBI (substantial Acquisition of Shares and Take Over) Regulations,
1997 the Company shall take up the matter with the SEBI for getting necessary exemption.
16. CLEARANCE OF INVESTOR COMPLAINTS OF THE REGION:
The Company seeking to delist the securities from a particular region should ensure that all
the complaints of the region are attended to and such company shall furnish a certificate from
the auditors of the company that there are no pending complaints from that region.
A certificate from the regional stock exchange to the effect that the company remains listed
on the regional stock exchange is also required to be furnished.
Also submit the details of financial position of the company whether it is a profit making
company, loss making company or closed Company in terms of production or commercial
transactions or a sick company registered with BIFR. If it is a BIFR registered company,
please furnish the necessary documentary evidence.
17. PAYMENT OF LISTING FEE ARREARS:
The Company desiring to delist the securities from a particular stock exchange shall pay the
Annual Listing fee till the date of delisting. There shall not be any arrears of listing fee
payable to the stock exchange at the time of consideration of application for delisting of
18. APPLICATION FOR DELISTING:
A Company shall make application to the Stock Exchange for delisting of shares only on
completion of the aforesaid formalities.
19. MENTION IN THE DIRECTORS’ REPORT:
The Company shall disclose the fact of delisting together with a statement of reasons and
justification therefore in the Directors Report of the Company and a copy of the same be sent
to the Stock Exchange immediately on dispatch of the notice of the Annual General Meeting
to the members of the Company.
CASE :1 IGATE Delisting PATNI Computer Systems
IGATE Corporation Accepts Patni Delisting Offer of Rs. 520/-
Streamlined Corporate Structure to Reduce Costs of Compliance and Governance
Fremont, CA and Bangalore, India: April 9th 2012 — IGATE Corporation, (IGATE or
the Company) announced the results of the Delisting offer of its subsidiary Patni Computer
Systems Ltd (Patni) from the Indian Stock Exchanges.
Announcing the process as a success, IGATE accepted the discovered price of Rs.520/-
determined through a reverse book building process using the electronic facility of the BSE,
in accordance with the SEBI Regulations.
The Public Shareholders holding equity shares of the Company were invited to submit bids
via an offer that opened on March 28, 2012 and closed on March 30, 2012.
• IGATE received offer for 16.2 million shares, but they had total of 26.8 million shares.
• Total bid came for 14.3 million shares at Rs. 520 per share.
• Delisting process opening date was on 28th March, 2012.
• Floor price was fixed for buyback at Rs. 356.74 per share.
• IGATE would cost Rs. 1394 crore for the delisting of Patni.
• IGATE owns around 83% of PATNI‘s share.
• If IGATE don‘t goes for buyback, then its promoter‘s have to bring down its shareholding
Phaneesh Murthy, CEO, IGATE Corporation said, ―We believe that the price of Rs.520/-
provides both a reasonable premium to the Patni public shareholders and is still accretive to
IGATE shareholders while being strategic to the company. In addition, the better
performance in Q4 2011 and the benefits of a streamlined corporate structure enabled us to
arrange for some extra funding during the last week and raise the debt amount to $265
The remaining shareholders of Patni post the delisting will be able to offer their shares at the
discovered price during the period of one year from the date of delisting. A separate offer
letter in this regard will be sent to the shareholders who have either not participated in the
offer or whose shares have not been accepted under the offer.
Commenting on the announcement, Sujit Sircar, CFO, IGATE Corporation said, ―With the
front-end and shared services successfully integrated, we are confident that from here on, we
will be able to integrate our delivery operations fully. The successful delisting will also set us
up well for a possible downstream merger while also reducing costs of Compliance and
About IGATE Corporation:
IGATE Corporation is the first integrated Technology and Operations (ITOPS) company
providing Business Outcomes based solutions under the brand name IGATE' - the common
brand identity of two organizations — IGATE and Patni. With IGATE Corporation having
acquired a majority stake in Patni Computer Systems Limited, the two companies, under the
common brand IGATE, provide full-spectrum consulting, technology and business process
outsourcing, and product engineering services on a Business Outcomes-based model. Armed
with over three decades of IT Services experience and powered by the ITOPS (Integrated
Technology and Operations) platform, IGATE‘s multi-location global organization with a
talent pool of over 27,000 people, consistently delivers effective solutions to over 360
Fortune 1000 clients spanning across verticals like: banking and financial services; insurance
and healthcare; life sciences; manufacturing, retail, distribution and logistics; media,
entertainment leisure and travel; communication, energy and utilities; public sector; and
independent software vendors.
IGATE Corporation is listed on NASDAQ (IGTE), and Patni Computer Systems Limited is
listed on the Bombay Stock Exchange (532517), the National Stock Exchange of India
(PATNI) and the New York Stock Exchange (PTI).
CASE: 2 International Paper To Delist AP Paper
International Paper seems to be tired of the regulatory hurdles in India and may soon consider
delisting of AP Paper Mills (APPM), which it acquired in 2011 report.
International Paper Corp (IPC) is in talks with bankers to explore options to delist AP Paper
When contacted however an IPC spokesperson said; "We do not comment on rumors and
speculation." However, the delisting may have to wait for some time since the open offer of
IPC for AP paper mills is currently in contention in the Supreme Court.
Background of IPC- APPM acquisition
International Paper acquired APPM in 2011. The price of the acquisition was Rs 674 per
share for the promoter stake. This included a non-compete fee of Rs 130.7 per share.
However the open offer was priced at Rs 544 per share excluding the non-compete fee.
• AP Paper is the subsidiary company of US-based major International Paper. It is trading at
about Rs. 306. The company‘s sole promoter International Paper holds 75% equity of the AP
• The AP Paper Mills Limited has informed the Exchange for the delisting of Equity shares of
the company from the Hyderabad Stock Exchange Limited.
• On Monday, shares of AP Paper Mills Limited increased to 16.44% to Rs. 307.35, up Rs.
• As the share price is increasing rapidly, The International Paper (Owner) wants to delist AP
Paper by offering sufficient amount of premium to its existing shareholders.
• AP Paper was acquired by International Paper after a buyout of promoters‘ stake and open
offer. This helped International Paper to become majority stakeholder.
• FII and DII‘s hold 4.64% and others have 20.37% in AP Paper.
SEBI had cleared the deal but with riders
SEBI disapproved the price discrimination, moved the Securities Appellate Tribunal (SAT).
Due to this, IPC had to deposit Rs 112 crore in an escrow account. SAT then in an order
dated September 9, 2012, asked IPC to pay the amount in the escrow account to shareholders
that had tendered in the open offer, putting the ball in Sebi and the shareholders court.
However IPC then filed a case against the SAT order in Supreme Court - the verdict of which
is still awaited.