When the financial markets are on a decline, company managements tend to utilize it as an opportunity to delist shares from stock exchanges. Not only is there a perception that the depressed market price is far from reflecting the true value of the company, but it also provides the promoters the ability to acquire the shares of the public shareholders at a relatively lesser cost. It is no wonder that several Indian companies such as Vedanta, Adani Power and United Spirits, among other have initiated delisting proposals. However, since the choice of timing of a delisting vests in the hands of the promoters and management, an important question arises whether this tilts the balance unduly in their favour.
In a column in BloombergQuint titled “The Probity of Delisting in a Downturn”, I offer some thoughts on whether the mechanisms embedded in SEBI (Delisting of Equity Shares) Regulations, 2009 preserve the ability of exiting shareholders to claim the price they deserve. I also explore the price discovery process and various minority shareholder protection mechanisms available in the SEBI Regulations and discuss possible alternatives.