On May 06, 2025, the Securities and Exchange Board of India (“SEBI”) has issued a consultation paper inviting public comments on a proposal to introduce a separate carve-out under the SEBI (Delisting of Equity Shares) Regulations, 2021 specifically for voluntary delisting of Public Sector Undertakings (“PSUs”) where the promoter or promoter group holds 90% (ninety percent) or more of the total issued equity shares (“Consultation Paper”).[1] SEBI invites comments/ suggestions along with rationale may be submitted latest by May 27, 2025.
SEBI has observed that certain listed PSUs maintain low public float and/ or face weak financial fundamentals. While some remain profitable, they may not have long-term business prospects due to factors such as obsolete operations, strategic asset divestment decisions by the government, or planned sell-offs of operational units. Despite these challenges, the market pricing of such PSUs often remains elevated owing to perceived sovereign backing, which may not align with their underlying book value.
Under the current delisting framework, frequently traded PSUs must determine the floor price based on the 60 (sixty) day Volume Weighted Average Market Price (VWAMP). This methodology often results in significantly higher delisting prices, increasing the budgetary burden on the Government in cases where it seeks to delist these entities.
In light of these challenges, SEBI is considering a dedicated carve-out within the existing Delisting Regulations for PSUs with the proposed features mentioned in the Consultation Paper.
[1] https://www.sebi.gov.in/reports-and-statistics/reports/may-2025/consultation-paper-on-separate-carve-out-for-voluntary-delisting-of-public-sector-undertakings_93820.html