Level 1 · How it works
How delisting works
The promoter offers to acquire every public share so the company can leave the exchange: the floor price, the indicative price, the reverse book build, the 90% test and the counter offer.
On this page
What a delisting is
A company listed on an exchange can leave it if its promoter, called the acquirer, offers to take out the public shareholders. Holders who tender are paid the final price; holders who do not keep shares that no longer trade on the exchange.
The floor price
The Floor price. The lowest price SEBI allows in a delisting, worked out from recent trading prices, the acquirer’s own purchases and adjusted book value. Learn more is the minimum. Since 25 September 2024 it is the highest of (Reg 19A):
- the volume-weighted average price the acquirer paid in the past 52 weeks;
- the highest price the acquirer paid in the past 26 weeks;
- the adjusted book value on consolidated accounts, from a registered valuer (not for public sector companies);
- the volume-weighted average market price over 60 trading days, if the shares are frequently traded;
- a valuer’s price, if they are not.
The reference date is the day of the first public announcement.
The indicative price
The acquirer may name an Indicative price. A price above the floor that the promoter names before bidding. If the discovered price lands between the floor and it, the promoter must pay the indicative price. Learn more, which must be higher than the floor (Reg 20(4)). It can be raised before bidding starts but never lowered (Reg 20(5)). It matters because of what happens if bids land below it: see the outcomes below.
The reverse book build
Bidding opens within 7 working days of the detailed public announcement and runs for 5 working days (Reg 17(1)). Holders tender through their broker at any price at or above the floor. The bids are stacked from the lowest price up, and the Discovered price. In a delisting, the price at which tendered shares take the promoter’s holding to 90%, read from bids stacked lowest to highest. Learn more is the price at which the accepted bids take the acquirer to 90% of the shares (Reg 20(1), Schedule II). Shares held by depository-receipt custodians, employee benefit trusts and inactive holders are left out of the count. The result is announced within 2 hours of the close (Reg 17(3)).
Bids can be raised or withdrawn, not lowered, until one day before bidding closes (Schedule II, clause 5).
The 90% test
The 90% rule. A delisting goes through only if the acquirer ends up holding 90% of the company. Short of that, the offer fails and the stock stays listed. Learn more: the delisting succeeds only if the acquirer’s holding plus the shares accepted reaches 90% of the company’s shares (Reg 21(a)). There is no separate condition on how many public shareholders take part. If it fails, every tendered share is returned and the company stays listed.
The outcomes
| Discovered price | What happens |
|---|---|
| Equal to the floor or the indicative price | The acquirer must accept it (Reg 22(1)). |
| Above the floor, below the indicative price | The acquirer must accept, and pays the indicative price (Reg 22(2)). |
| Above the indicative price | The acquirer may accept, reject, or make a counter offer (Reg 22(3), 22(4)). |
Everyone whose bid is at or below the final price is paid the final price, not their own bid. Bids above it are not accepted, and those shares come back.
The counter offer
A Counter offer. If the discovered price is above the indicative price, the promoter may propose a lower price instead, never below the indicative price. Learn more is allowed only in a reverse book build, and only if the acquirer’s holding plus the shares tendered is at least 75% of the company and at least half of the public shareholding was tendered (Reg 22(4)). It must be made within 2 working days of bidding closing, at a price no lower than the higher of the volume-weighted average price of the shares tendered and the indicative price (Reg 22(5)). Holders then get a new window to tender at that price.
The fixed-price route
Since September 2024 an acquirer can skip bidding and name one fixed price at least 15% above the floor, if the shares are frequently traded (Reg 20A). The delisting succeeds if 90% is reached at that price; there is no counter offer on this route.
How money is made
For a holder the question is the final price against the market price. The indicative price works as a promise: if the 90% is reached anywhere between the floor and it, that is what is paid.
| Figure | |
|---|---|
| Shares in the company | 1,00,00,000 |
| Held by the promoter | 75,00,000 (75%) |
| Needed to reach 90% | 15,00,000 |
| Market price before bidding | ₹240 |
| Bid price | Shares bid | Cumulative |
|---|---|---|
| ₹200 | 3,00,000 | 3,00,000 |
| ₹220 | 4,00,000 | 7,00,000 |
| ₹250 | 5,00,000 | 12,00,000 |
| ₹270 | 4,00,000 | 16,00,000 |
The cumulative bids pass 15,00,000 at ₹270, so ₹270 is the discovered price. It is above the indicative price, so the acquirer may accept at ₹270, reject, or counter. 91% would be reached with all tenders and 64% of the public shares were tendered, so a counter offer is allowed, at no less than ₹260. Had another 3,00,000 shares been bid at ₹250, the 90% would have been reached at ₹250: between floor and indicative, so the acquirer would pay ₹260. A holder who bid 100 shares at ₹220 would receive ₹26,000 against ₹24,000 at the market price.
What can go against you
- The delisting fails and the price falls back once the offer is gone.
- The acquirer rejects a discovered price above the indicative price.
- A bid above the final price is not accepted.
- Shares not tendered stop trading on the exchange.