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nism-series-xv-voluntary-delisting-reverse-book-building-90-percent[ RESEARCH ANALYST ]

Under SEBI (Delisting of Equity Shares) Regulations, what is the mandatory price discovery mechanism and post-offer shareholding threshold required for a successful Voluntary Delisting by promoters?

[ A ]Price is fixed arbitrarily by the company's internal security guards; delisting is successful if promoter holding reaches 10%.

[ B ]Price is discovered through a Reverse Book Building (RBB) process with a floor price; delisting is successful only if the post-offer promoter shareholding reaches at least 90% of total issued share capital.[ CORRECT ]

[ C ]Promoters are legally permitted to delist a company without offering any exit option or price to public shareholders.

[ D ]Voluntary delisting is completely banned in India under all circumstances by the Supreme Court.

Takeaway

Option B is correct: Price is discovered through a Reverse Book Building (RBB) process with a floor price; delisting is successful only if the post-offer promoter shareholding reaches at least 90% of total issued share capital.

Derivation

Under SEBI Delisting Regulations, when promoters seek to voluntarily delist a company and take it private: (1) An exit opportunity must be provided to all public shareholders through a Reverse Book Building (RBB) process where public shareholders tender shares at prices at or above the floor price. (2) The delisting offer is deemed successful ONLY IF the promoter shareholding post-offer reaches at least 90% of the total issued equity share capital. If successful, remaining public shareholders have the right to tender their shares at the final discovered exit price for a period of up to one year. This tests delisting governance. The common error is confusing 90% with a simple 51% or 75% majority.

Why the others fail

A — Price is fixed arbitrarily by the company's internal security guards; delisting is successful if promoter holding reaches 10%.

Delisting prices are determined via competitive reverse book building by public shareholders, requiring a 90% threshold, not 10%.

C — Promoters are legally permitted to delist a company without offering any exit option or price to public shareholders.

SEBI strictly mandates transparent exit opportunities and fair price discovery for all public shareholders before delisting.

D — Voluntary delisting is completely banned in India under all circumstances by the Supreme Court.

Voluntary delisting is fully permitted under SEBI regulations provided the 90% acquisition threshold and RBB process are fulfilled.