SEBI introduces special measures to facilitate voluntary delisting of certain PSUs
In a landmark move, the Securities and Exchange Board of India (SEBI) has introduced a special framework to ease the voluntary delisting of certain public sector undertakings (PSUs). This decision, announced on June 18, 2025, aims to streamline the government’s exit from companies with minimal public shareholding.
Focus on Specific PSUs
SEBI’s new rules apply only to PSUs where the central government or another PSU owns at least 90% of equity shares. The framework excludes banks, non-banking financial companies (NBFCs), and insurance companies. The goal is to simplify the delisting process for companies with thin public float and limited market activity.
In May 2025, SEBI held a public consultation to gather feedback. The changes reflect the suggestions received during that process.
Key Features of the New Delisting Framework
1. No Two-Thirds Shareholder Approval Required
Earlier, a company needed approval from at least two-thirds of public shareholders to proceed with delisting. SEBI has now removed this requirement for eligible PSUs. This change reduces delays and ensures smoother exits for government-owned companies.
2. Fixed-Price Exit Instead of Reverse Book Building
SEBI has replaced the reverse book-building process with a fixed-price mechanism. Under the new rule, the acquirer must offer a price that is at least 15% higher than the floor price. This pricing method provides clarity and avoids inflated exit valuations caused by market speculation.
3. Simpler Price Calculation
The new pricing model removes the need for complex calculations based on past trading volumes or price averages. Instead, it uses straightforward valuation metrics approved by SEBI. This change benefits both the acquirer and minority shareholders by making the process more transparent.
4. Unclaimed Shares and Funds Held for 7 Years
If shareholders do not claim their funds after delisting, stock exchanges will hold the money in escrow for up to seven years. After that, the unclaimed funds will be transferred to either the Investor Education and Protection Fund (IEPF) or SEBI’s Investor Protection and Education Fund (IPEF). Shareholders can still claim their money during this holding period.
Why SEBI Made These Changes
Many PSUs trade with low liquidity and minimal market interest. Despite poor fundamentals, some command high market prices due to the perception of government support. This disconnect made delisting costly under the old rules.
The reverse book-building method often forced the government to pay inflated premiums. These prices were not always in line with a company’s actual worth. The new fixed-price route corrects this issue and ensures better value for public funds.
The reforms also help the government manage its disinvestment plans more effectively. By removing barriers, SEBI has made it easier to exit companies that no longer align with its economic priorities.
Boosting Disinvestment Targets
The Indian government has set a disinvestment target of ₹60,000 crore for FY 2025–26. This new framework supports that goal by providing a faster, fairer way to delist PSUs. It allows the government to focus on strategic areas and release capital for development projects.
By simplifying delisting for low-float PSUs, SEBI ensures better use of market resources. It also helps taxpayers by avoiding unnecessary overpayment during the buyback of shares.
How Investors Are Protected
Though procedural requirements have eased, SEBI has taken care to protect minority investors. A mandatory 15% premium over the floor price ensures fair compensation. Also, the seven-year escrow rule gives investors ample time to claim any uncollected money.
These measures show that SEBI values both regulatory efficiency and investor protection. The new rules strike a balance between reducing red tape and ensuring fairness.
What This Means for Markets
Analysts expect these changes to help the government exit from loss-making or inactive PSUs more smoothly. The reforms could also lead to improved valuation practices and better market behavior around PSU stocks.
Retail investors should evaluate delisting offers carefully. While the fixed premium offers clarity, it’s important to assess long-term value and exit timing.
The success of this framework will depend on its execution. If early delistings go smoothly, more PSUs may follow, creating a model for future reforms.
Conclusion
SEBI’s new delisting framework marks a major policy shift. By cutting red tape, offering fair pricing, and protecting investors, the regulator has made PSU exits more practical. The change supports India’s economic agenda while promoting market stability.
As PSUs begin to use this route, the capital market will watch closely. This reform could become a benchmark for efficient disinvestment and smarter regulation.
