Compulsory delistings outnumber voluntary ones by 50% so far this year

Half a dozen companies have already been delisted compulsorily in 2021

More companies are being forced to delist their shares from the stock exchanges than the ones that are leaving voluntarily.

There have been six such compulsory delisting of shares so far in 2021, compared to four voluntary delistings, shows data from the National Stock Exchange.

Compulsory delistings are when a company is penalised for not meeting the requirements of the listing agreement. Its shares are no longer allowed to trade on the stock exchange. A voluntary delisting is when the company decides to exit the stock exchange on its own. This may be because the owners have decided to buy out the public shareholders and take the company private.

The six companies which have been compulsorily delisted are Bilpower, Pochiraju Industries, Shree Ganesh Forgings, Vijay Shanthi Builders, Autoriders Finance and  Girdharilal Sugar and Allied Industries.  The voluntary delistings include Garden Silk Mills, Baba Agro Food, GTN Industries and Global Offshore Services.

There have been a total of 364 delistings on the NSE since 2002.  Other causes for delistings include liquidation, government notifications, and exits from the institutional trading platform (ITP) for start-ups and small and medium enterprises.

There had been a string of compulsory delistings in 2016, 2017 and 2018. The three years saw 118 total such delistings compared to only 16 voluntary delistings. This resulted in there being more compulsory delistings over the last 20 years than there have been voluntary ones. There are a total of 143 compulsory delistings on record for the NSE since 2002. This is followed by 108 delistings on account of liquidation. The number of voluntary delistings is third at 98. The remainder are due to exits from the ITP platform or because of government decisions.

The rise could be on account of a strong view being taken on non-compliance by the exchange, said Shriram Subramanian, founder and managing director of domestic proxy advisor InGovern Research Services.

"Any exchange would want to have quality names," he said.

A voluntary delisting requires the promoter who controls the company to offer an exit price to shareholders.

“The exit price would be decided on the basis of bidding by the public shareholders. If the exit price so determined is acceptable to the promoter, the promoter pays that price to the investors and the investors can exit,” according to a regulatory note on the matter.

The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 say that the stock exchange is required to form a panel of experts from which it would appoint one or more experts to determine the value of the delisted shares. The promoter is required to acquire these shares from the public at this value.

There are also restrictions on the promoters and other officials as a result of such compulsory delistings.

“Where a company has been compulsorily delisted under this Chapter, the company, its whole time directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly access the securities market or seek listing for any equity shares for a period of ten years from the date of such delisting,” it said.

Emails sent to the stock exchanges and the companies delisted this year did not immediately receive a response.