SEBI has introduced a special framework in its 2025-26 annual report for the voluntary delisting of Public Sector Undertakings (PSUs). The main objective of this initiative is to simplify the delisting process and address issues arising from traditional share price determination methods. The most crucial question for small investors is how much they will receive upon selling their shares and how the withdrawal option will function after delisting.
Under SEBI's new framework, a path for delisting at a fixed price has been paved for some Public Sector Undertakings (PSUs). Small shareholders of certain government companies may receive an exit offer at least 15% higher than the floor price.
Delisting means that a company's shares are removed from the stock exchange, making it impossible to buy and sell the shares through normal exchange mechanisms. This framework will not apply to all government companies; it will apply only to PSUs that are not banks, NBFCs, or insurance companies. Furthermore, the Government of India and other PSUs must collectively hold at least 90% of the issued shares of the company.
According to SEBI, government companies are viewed as government-backed and relatively low-risk entities in the market. This directly impacts the market price of their shares, often causing the share value to be significantly higher than its book value. In the old system, there was excessive reliance on the 60-day volume-weighted average market price to determine the floor price. This often resulted in a high floor price, making it expensive for the government or promoter to buy the remaining shares from public shareholders and complicating the delisting process.
The new framework provides the option of delisting at a fixed price for eligible PSUs. Three criteria will be considered to determine the floor price. The first criterion is the volume-weighted average price paid or to be paid by the acquirer in the last 52 weeks. The second criterion is the highest price paid for an acquisition in the last 26 weeks. The third criterion is the joint valuation report of two independent and registered valuers. The highest price among these three will be considered the floor price. This will reduce dependence solely on the share market price and also incorporate the company's actual financial health into the valuation.
The most significant aspect of this special framework relates to the fixed offer price. In the case of eligible PSUs, the offer price must be at least 15% higher than the floor price. However, this does not imply that every investor will gain a profit of 15% or more over their purchase price. The final profit will depend on the price at which the investor bought the shares and the offer price determined during the delisting. Therefore, small shareholders must pay special attention to three things after the delisting announcement: the floor price, the fixed offer price, and the exit window.
It is not mandatory for every shareholder to sell immediately after delisting. However, the shares will not be listed for trading on the exchange after a period of one year. If the one-year period expires within 30 days from the date of delisting of the eligible PSU, the outstanding amount will be transferred to the account of the designated stock exchange. The exchange will hold this amount for seven years so that the concerned investor can claim it.
If no claim is made within the seven-year period, the amount will be further transferred under the relevant law. In the case of companies falling under the Companies Act, 2013, this amount may go to the IEPF, while in other cases, it can be transferred according to the rules of SEBI's Investor Protection and Education Fund (IPEF). Nevertheless, investors can submit their claims to the designated stock exchange through the prescribed procedure, and the exchange can proceed with paying the amount to the investor by retrieving it from the relevant fund.
The biggest advantage of the new rules is that a clear exit mechanism and a minimum price premium have been set for small shareholders in the delisting of eligible PSUs. However, this should not be taken as a guarantee of profit. Investors must check what the floor price is, what the fixed offer price is, and at what price they bought the shares. Ultimately, the actual benefit received by the investor in the delisting will depend on these factors.
