SEBI Simplifies PSU Delisting Rules and Eases Regulations for Investors

The Securities and Exchange Board of India (SEBI) has introduced simplified regulations for the voluntary delisting of Public Sector Undertakings (PSUs) where the government holds 90% or more equity. The notification, issued on September 1, 2025, aims to streamline the delisting process while safeguarding shareholder interests. However, these rules do not apply to banks, Non-Banking Financial Companies (NBFCs), or insurance companies, even if government holdings exceed 90%.

Relaxed Approval Process for PSUs

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Previously, delisting required the approval of at least two-thirds of public shareholders, a step that often delayed the process. Under the new framework, eligible PSUs no longer need this consent, making the delisting procedure faster and more efficient.

Fixed Price Option Introduced

The regulator has also removed the mandatory reverse book-building process for pricing shares during delisting. Instead, PSUs can now opt for a fixed-price delisting offer, provided the price is at least 15% higher than the floor price. This fixed-price option is available irrespective of the stock’s trading activity, offering companies greater flexibility in exiting the market.

Determining the Floor Price

SEBI has set clear guidelines for calculating the floor price. It will be the highest of three measures: the volume-weighted average price over the past 52 weeks, the maximum traded price in the preceding 26 weeks, or the value determined in a joint valuation report prepared by two independent registered valuers.

Shareholder Protection Measures

Shareholders who do not tender their shares within the one-year exit window after delisting will have their unpaid consideration deposited with the designated stock exchange within 30 days of the window’s closure. These funds will remain available for seven years, allowing investors to claim them at any time within this period, thereby providing long-term protection.

Other Regulatory Changes

In addition to PSU delisting, SEBI has simplified disclosure requirements for portfolio managers and privately placed Infrastructure Investment Trusts (InvITs). Portfolio managers can now use a streamlined disclosure document, while the minimum investment for InvITs has been harmonised to ₹25 lakh, aligning primary and secondary market rules.

The regulator has also offered relief to startup promoters by allowing them to retain and exercise Employee Stock Options (ESOPs) granted at least one year before filing IPO papers. This reverses previous rules that required liquidation of such benefits, aiding startups, particularly those undertaking reverse flipping to India.

Conclusion

Recent changes from SEBI make PSU delisting easier, safeguard shareholder interests, and lessen the regulatory requirements for InvITs and portfolio managers.  These steps are intended to improve efficiency and promote the expansion of the Indian capital market by streamlining regulatory procedures and offering investor protections.