Value of delisting offers at record-high amid pandemic surge, shows data

Majority shareholders offered more money to take their companies off the stock exchanges this year than in the previous 17 years.

The value of such delisting offers for the financial year 2020-21 (FY21) was a record Rs 22,165.5 crore, show numbers from Prime Database. This is the highest show records available since FY04. It is more than four times the previous high of Rs 5,479.4 crore in FY16.

A delisting happens when a majority or controlling shareholder called the promoter buys back enough shares from the public to take the company off the stock market. The amount acquired from minority shareholders through such offers in FY21 was also the second highest since FY04 at Rs 4,199.8 crore.

The numbers are skewed by a few large companies.

Rising markets are typically not a good time for delisting since it becomes that much more expensive to take companies off bourses, according to Pranav Haldea, managing director at Prime Database.

“It is typically a bear market phenomenon,” he said.

Vedanta’s delisting bid alone accounted for the bulk of the amount on offer to buy back shares. Its failure in October 2020 also meant a lower amount spent on acquisition overall. There have been 14 such offers during the year in all.

“All sorts of stocks have got lifted in the current bull run given the liquidity in the market. For many companies which should not have listed in the first place, given their business models, valuations and the stock price would have been lower for an extended period. So when the valuation is high, smaller shareholders stuck with the stock for a long time gladly exit when the company comes up with a delisting plan,” said Skanda Jayaraman, head of investment banking, at Spark Capital.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor