The process of taking the company’s stock out of the stock market is called delisting. .Companies delist their stock from the market on their own volition or on the instructions of SEBI.
Know all the important things related to delisting
stock market in the year 2021 (stock market) in the history of IPO (IPO) is known as the year. About 65 companies raised a total of Rs 1.29 lakh crore by taking their shares in the market. This fair of IPO put a queue of new investors in the stock market. New investors are very excited by the huge amount of money in many IPOs. Sahil is also one such investor, he had invested money in an IPO and he made a lot of profit in it. But he was surprised by a recent news. He had invested money in a company many years ago, which is now delisted from the stock market.delisting of share) is happening. What is this new thing, man… they got upset.
What do I have to do now? While brainstorming on all these questions, he reached the stock market knowledgeable friend Atul. Atul said…. Don’t panic, drink coffee first… let me tell you all… The way companies are listed on exchanges, they are also delisted. It is a process in which the shares of a listed company are delisted from the stock exchanges.
Why do companies delist
Although it sounds like a very serious and evil thing, but the truth is that delisting is not always a bad thing. In fact, it is often voluntary at the request of the company. On the other hand, when a company is forcibly delisted by the market regulator SEBI, it is called Compulsory or Compulsory Delisting.
Dude, I do not understand the whole matter… explain in a little detail… Sahil said… Atul said… don’t worry… I will tell. When a company voluntarily declares delisting, it buys back the shares held by common investors through reverse book building process. Through this process, the common shareholders are given the freedom to decide the fair price for the buyback. The price at which the highest number of bids are received is considered as the cut off price for buyback.
Once the cut off price is decided, the company has only two options, either accept it or make a counter offer. If the company chooses the cut-off price, then a buyback takes place. The delisting of the company is considered successful only when, after the purchase of the shares of the common investors, the share of the promoters becomes 90% of the total share capital of the company.
understand by example
For example, in the year 2012, Nirma Limited did voluntarily delisting. The company had bought back 18 per cent of the minority shareholders at a price of Rs 260 per share. The company did this delisting to gain new valuations and re-listing across its verticals like FMCG, Pharma, Chemicals, Cement, Ports, Infrastructure and Power. Later the company got its cement unit Nuvuco Vistas listed on the exchanges.
Even in case of compulsory delisting, the promoters of the company have to buyback all the shares of the public. However, at what price there will be buyback of shares, it is not decided by the reverse book building process but by an independent valuation agency. Lanco Infratech and Moser Baer India are some examples of such mandatory delisting.
Oh ho… Now the whole matter seemed to be coming to Sahil’s understanding.
Money9’s advice is that if a company is compulsorily delisted, it would be wise for you to stop investing in it by selling your shares to the promoters. To understand what is the reverse book building process when a company is delisted, see Formula Guru.
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