A PROJECT REPORT ON

“A STUDY ON TRENDS AND REASONS BEHIND DELISTING OF

LISTED COMPANIES IN INDIA”

Submitted to

UNIVERSITY OF MUMBAI

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF DEGREE OF MASTERS OF MANAGEMENT STUDIES
(M.M.S)

MASTERS OF MANAGEMENT STUDIES

M.M.S – Finance

(2018-2020)

SUBMITTED BY PROJECT GUIDE

KARAN RAJENDRA BHOSLE PROF. RAHUL

SANGHAVI

SHEILA RAHEJA SCHOOL OF BUSINESS MANAGEMENT AND RESEARCH

Raheja Education Complex, Kher Nagar, Opp. Chhatrapati Shivaji Ground,

Bandra (East), Mumbai - 400051

1
2
 INDEX

Sr. No Topics Page no

Prefatory Items
1 Letter of Transmittal
2 Letter of Authorization
3 Certificate from Guide
4 Declaration
5 Acknowledgement
6 Executive Summary
7 Table of Contents
b) Table Index
c) Graph Index
Introduction
8 Problem Statement
9 Research Objective
10 Research Hypothesis
11 Research Design
12 Literature Review
13 Methodology
Sampling Strategy
14 Data Collection
15 Data Analysis
16 Hypothesis Testing
17 Limitations
18 Conclusions
Conclusions
19 Findings
20 Appendices
Research Proposal
21 Bibliography

3
PREFATORY
ITEMS

4
 LETTER OF TRANSMITTAL

Date: - 24/02/2020

To,

Dr. Vijay Wagh

Director,

Sheila Raheja School of Business Management and Research,

Bandra, Mumbai – 400051

Ref: A Study on Trends and Reasons behind Delisting of Listed Companies in India.

Dear Sir,

The Report Outline in the research proposal on Date: - 24/02/2020 is complete. I have
personally conducted the statistical analysis and prepared this report.

The Report addresses the trends on Delisting of shares in Indian Stock Market.

Successfully accomplished the research objectives described as the outlines. I am to meet

my goals of surveying a group of people.

Yours Sincerely,

Karan Rajendra Bhosle

Roll No - F-105

5
 LETTER OF AUTHORIZATION

Date: - 24/02/2020

Dear Student,

Subject: Submission of Specialization Project

After receiving the proposed study, “A Study on Trends and Reasons behind Delisting
of Listed Companies in India.”, presented by the student of Sheila Raheja School of
Business Management, I have granted permission for the study to be conducted in the
name of the institute.

The purpose of study is to conduct research on “A Study on Trends and Reasons

behind Delisting of Listed Companies in India.” The primary activity will be to study
the trends of Delisting of shares in Stock Market.

The student prepares the project step by step accordingly to the topic taught after every
lecture under my guidance.

Dr. Vijay Wagh

Director

6
 CERTIFICATE

This is to certify that project titled “A Study on Trends and Reasons behind Delisting
of Listed Companies in India.” is successfully completed by Mr. Karan Rajendra
Bhosle during the IV semester, in partial fulfilment of the Master‟s Degree in
Management Studies recognized by the University of Mumbai for the academic year
2018-20 through Sheila Raheja School of Business Management & Research, Bandra
(E), Mumbai.

This project work is original & not submitted earlier for the award of any degree, diploma
or associate ship of any other university/ Institution.

Prof. Rahul Sanghavi Dr. Vijay Wagh

Signature of the Guide Signature of the Director

7
 DECLARATION

I declare that this report, “A Study on Trends in Delisting of Shares in India” is my

original work and not copied from elsewhere nor submitted before for any degree,
diploma, or course to any Institute or University and due acknowledgement has been
given in the bibliography to all sources be they printed, electronic or personal. This
project is done in partial fulfilment of the requirement for the degree of Masters of
Management Studies by Mumbai University. The information incorporated in this project
is true and original to the best of my knowledge.

Signature

Karan Rajendra Bhosle

8
 ACKNOWLEDGEMENT

I like to convey my heartfelt thanks to Mr. Rahul Sanghavi, who has immensely
supported and guided me and has been there for me whenever I needed his support during
my project research work. A special gratitude to Dr. Vijay Wagh, Sheila Raheja School
of Business Management and Research (SRBS) for guiding me to undertake this study.

By,
Mr. Karan Bhosle
Roll no. F105
Specialization: FINANCE
Sheila Raheja School of Business Management and Research, Mumbai

9
EXECUTIVE
SUMMARY

10
 EXECUTIVE SUMMARY

Delisting denotes removal of the listing of the securities of a listed company from the
Stock Exchange. Delisting differs from suspension or withdrawal of admission to
dealings of listed securities, which is for a limited period.

„Suspension‟ of trading in securities means that no trade can take place in the securities
of the company suspended for a temporary period. Suspension is not done at the instance
of company but it is action taken by the Stock Exchanges against the company, generally
for non-compliance of listing conditions as stipulated under SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015 (LODR Regulations). Once, the
company makes good the compliance of the listing conditions under LODR Regulations,
stock exchange withdraws suspension and permits trading. Stock exchanges may impose
fines or freeze promoter/promoter group holding of designated securities, as may be
applicable in coordination with depositories at the instances of non-compliance with
LODR Regulations.

On the other hand, „delisting‟ of securities means removal of the name of the company
from the stock exchange and no trade can take place in the securities of the company
delisted. Delisting of securities can be done either by company voluntarily or by the stock
exchange, compulsorily. Generally stock exchanges, in order to impose severe
punishment on companies compulsorily delist securities of any company, as a last resort.
Compulsory delisting affects reputation of company. Delisting of securities may be of
two types, namely, voluntary delisting and compulsory delisting. In the case of voluntary
delisting, a listed company seeks of its own volition for the delisting of its securities;
while in case of compulsory delisting, the Stock Exchange itself delists the securities of
such Company.

PROBLEM STATEMENT:

“Voluntary and Non voluntary delisting is done by companies so to understand the

reasons behind it the study is conducted.”

RESEARCH OBJECTIVES:

11
To Analyse trend of listed companies who have opted for delisting.

To identify the reasons for delisting.

HYPOTHESIS:

Set 1:
H0: There is Decrease in Trends of Delisting of Listed companies in India
H1: There is Increase in Trends of Delisting of Listed companies in India
Set 2:
H0: SEBI rules and regulations are forcing listed companies to go for involuntary
delisting.
H1: SEBI rules and regulations are not forcing listed companies to go for involuntary
delisting.

Research Design is a plan of action to be carried out in connection with a research

project. The research design use in this study is DESCRIPTIVE research.

12
TABLE OF
CONTENT

13
 Graph Index

Page
Sr. No Topic
No.
1 Graph 1.1

2 Graph 1.2

3 Graph 2.1

4 Graph 2.2

5 Graph 3.1

6 Graph 4.1

7 Graph 4.2

14
PROBLEM
STATEMENT

15
 PROBLEM STATEMENT

 Voluntary and Non voluntary delisting is done by companies so to understand the

reasons behind it the study is conducted

16
RESEARCH
OBJECTIVE

17
 RESEARCH OBJECTIVE

 To Analyse trend of listed companies who have opted for delisting.

 To identify the reasons for delisting.

18
HYPOTHESIS

19
 HYPOTHESIS

 Set 1:
H0: There is Decrease in Trends of Delisting of Listed companies in India
H1: There is Increase in Trends of Delisting of Listed companies in India

 Set 2:
H0: SEBI rules and regulations are forcing listed companies to go for involuntary
delisting.
H1: SEBI rules and regulations are not forcing listed companies to go for
involuntary delisting.

20
RESEARCH
DESIGN

21
 RESEARCH DESIGN

Research Design is a plan of action to be carried out in connection with a research

project. The research design use in this study is DESCRIPTIVE research.

22
LITERATURE
REVIEW

23
 LITERATURE REVIEW

“This study aims to analyze fundamental factors and technical factors that influence stock
returns and their implications for company value in Indonesia Stock Exchange, sub sector
plastic and packaging. Fundamental factors of financial ratios are return on assets (ROA),
current ratio (CR), debt to equity ratio (DER), and price earnings ratio (PER) while the
technical factors are the rupiah exchange rate using changes in value exchange rupiah
(RP) against United States dollar (USD). This study used annual data for the observation
period from 2010 to 2017. The sampling method used was Purposive Sampling, as the
result 8 companies (64 samples) met the criteria and processed using E-views 9 program.
The analytical method used in this study is panel data and multiple linear regression as a
method of analysis and measurement of direct effect and indirect effect analysis. The
results showed that ROA, CR, DER, and PER are having positive and insignificant
influence on stock returns however the exchange rate has negative and significant
influence on stock returns. ROA, DER, and PER are having positive and insignificant
influence on company value however CR and exchange rates have a negative and
insignificant effect on company value. Stock returns has positive and significant
influence on company value. The examination of indirect effects showed stock return
could be considered as an intervening variable to measure the influence of fundamental
factors and technical factors to company value.”1

“Traditionally, the capital market has drawn the attention of analysts and academics,
inspired to understand the process of company shares going public and trading on a stock
exchange. An element had been overlooked in this research context, something that
suggests a void in the body of knowledge about the capital market and corporate
governance: delisting of firms.We plan to define the deciding factors for the Commodity
& Futures Exchange BOVESPA (BM&FBOVESPA) companies being delisted.
Methodologically, this work linked a set of variables gathered from secondary data

1
Andrie Raditya Julianto. Vol.6 (Iss.7): July 2019 ISSN: 2454-1907.

24
available in the Securities Commission of Brazil (CVM), BM&FBOVESPA, and
Economatica database.By evaluating 227 cancelations of the listing between 2001 and
2012, the results indicate that the de-listing of BM&FBOVESPA companies is
determined by the following factors: I increased concentration of ownership and control;
(ii) lower free float; (iii) lower liquidity of shares; (iv) greater cash availability; and (v)
greater scale.The fact that the controlling shareholder is a private or public corporation
defines substantial differences in the decision to delist. Though cash availability is the
most important factor in the first scenario, the principal determining factor for delisting is
in the second liquidity.From an academic perspective, this work expands the studies on
delisting, which are still incipient in the sense of the Brazilian capital market. For the
capital market, recognizing the characteristics of companies that are vulnerable to
canceling listing that deter investors concerned about inherent risks when the controlling
group that is interested in delisting acquires shares.”2

“Conventionally, delisting of shares did not auger well in India owing to its adverse
perception towards the depth and liquidity of the stocks. However, over the time, it was
realized that in a market driven economy and liberalized environment, the entry as well
as exit from the securities market should be free from undue barriers to protect the
minority interests as well. With a view to ensure an inclusive growing market, a need was
felt to plug the loopholes in the existing delisting framework and to make them
compatible with the internationally prevalent practices. The Securities and Exchange
Board of India (SEBI) superseding its delisting guidelines, 2003 notified the SEBI
(Delisting of Equity Shares) Regulations, 2009 commonly known as Delisting
Regulations to provide for a simplified procedure for delisting by small companies
exempting them from specified requirements subject to certain conditions. SEBI received
several representations on Delisting Regulations, 2009, from market participants

2
Annor da Silva Junior. Determining Factors for Delisting of Companies DOI: 10.1590 ISSN
1808-057X

25
including stock exchanges, industry representatives and investor associations,
highlighting the challenges faced in delisting process and also the suggestions to address
the concerns. Consequently, SEBI (Delisting of Equity Shares) Regulations, 2009 were
duly amended in the year 2015 and 2016 respectively. With a view to acquaint the
readers with the regulatory framework, trend towards delisting of shares and operation of
regional stock exchanges, the Institute decided to bring out this publication. I commend
the dedicated efforts put in by CS Khusbu Mohanty, Assistant Director, ICSI in finalising
the book by incorporating changes in regulatory framework, industry trends and other
added value, under the guidance of CS Sonia Baijal, Director, Professional Development,
Perspective Planning & Studies, ICSI. I am confident that this publication will prove to
be of immense practical value to professionals, corporate executives, and academicians
on the subject. In any publication, there is always a scope for further improvement. I
would personally be grateful to users and readers for offering their suggestions/comments
for further refinement.”3

“In today‟s world sources of capital hah no boundaries. In this competitive world
companies are raising capital not only from domestic sources but companies are looking
for international souses of funds also. Companies are scouting for capital all over the
world and raise capital where it is cheaper. Dues to globalization and increased cross-
border capital flows, smaller companies are enjoying the benefits of raising capital in the
international market. Cross listing of shares through issuance of depository receipts have
become a common occurrence. Investors‟ interest for foreign company shares has also
increased manifold and internationalization of equity market across globe. The
internationalization of equity markets covers FDI, portfolio investment pension funds,

3
CS Mamta Binani, 22, Institutional Area, Lodi Road New Delhi - 110 003 ISBN 978-93-
82207788

26
hedge funds and private equity funds. This paper focuses on international equity capital
and also related with Indian companies rasing capital from the international market.”4

“Delisting from a securities exchange has often been viewed as evidence of tough times
within an organisation. The purpose of this paper is to unravel the reasons behind
voluntary delisting. The study has made use of published literature with examples from
different countries. In as much as most delisting(s) are involuntary, there are good
reasons for a counter to opt for voluntary delisting in light of enhancing shareholder
value. The cost of remaining public versus the cost of going private has been cited as the
most determinant factor in voluntary delisting. Another notable reason has been found to
be the inability to raise equity capital by the listed firm owing to a relatively lower share
price compared to the real net asset value of the firm. The need to merge, demerge or
restructure a firm may be drivers of voluntary delisting.”5

“Delisting means permanent removal of securities of a listed company from a stock

exchange. For facilitating delisting of shares of listed entities, while protecting the
interest of investors / public shareholders by providing such public shareholders exit
with fair compensation, the Securities and Exchange Board of India (Delisting of
Equity Shares) Regulations, 2009 the Delisting Regulations were notified by SEBI on 10
June 2009. One of the key criticisms of the Delisting Regulations was that the
price discovered through reverse book building price typically was at significant
premium to prevailing market. The Securities and Exchange Board of India has,
vide notification dated November 14, 2018, introduced the Securities and Exchange
Board of India (Delisting of Equity Shares) (Second Amendment) Regulations, 2018.

4
Devendrakumar S. Gandhi. International Journal of Advanced Research. Vol. 4 | No. 4 | April
2015 ISSN: 2278-6236
5
Douglas Muyeche. VOLUNTARY DELISTING: THE REASONS BEHIND. Vol.3(1):16-18 ISSN:
2319-8834

27
The changes aim to plug the loopholes in the delisting process considering the
interests of the promoters, acquirers and public shareholders.”6

“The Stock Exchange is a regulated market of securities where contracts for the sale and
purchase of the financial instruments are stipulated. The financial instruments such as
stocks, bonds, derivatives with a definite price are traded and exchanged in the Stock
Exchange. In this case the price is determined by the balance of supply and demand. If
we would describe the Stock Exchange with an image, we would think a square in which
some companies with public offer or companies with public participation operate. In
particular, in it we may found industrial companies, financial companies, banks, services
companies, etc. If we refer to history, the first and real trade of securities occurred around
the year 1500 in Bruges. Nevertheless, Antwerp has been considered the first Stock
Exchange, as the one of Bruges cannot be defined a genuine Stock Exchange. In Albania,
till the end of 2014 we have had the Tirana Stock Exchange (TSE). The Tirana Stock
Exchange was founded in 2002 in the form of a joint stock company, and has operated in
accordance with the provisions of the Law No. 9901 dated 14.04.2008 “On the
Entrepreneurs and trading companies” and the Law no. 9879, date 21.02.2008 “On
Securities”. Initially, the listing of securities on the stock exchanges, for many
entrepreneurs, meant an advertisement for the company, while now it is a widespread
phenomenon in the world. If we refer to our country, we believe that the listing in the
stock exchange has an important role towards the awareness of our companies regarding
finding different manners from the traditional ones about their liquidity. Through this
paper, it is aimed to answer to a fundamental question as the one related to the reasons
why companies should be listed on the stock exchange. Each of the actions related to
trading on the stock exchange is one of the steps in the process of investment, therefore

6
DR. S. SETHURAM Assistant Professor, SRIT Business School, Sri Ramakrishna Institute of
Technology, Coimbatore, Tamil Nadu, India Volume 2 Issue 8 | ISSN: 2456-8880

28
we can say that this kind of financial transactions is not just about buying or selling a
particular security.”7

“In this paper, the authors seek to investigate the relationship between company‟s
attributes at the time of its initial public offering and the event of its delisting from the
five largest European stock exchanges: Euronext, the Deutsche Börse Group, London
Stock Exchange, BME and NASDAQ OMX. By distinguishing between the financial
systems of the United Kingdom and Continental Europe, the authors employ the Cox
Proportional Hazards model to highlight determinants and indicate differences between
the two regions for the sample of 936 listings from 2000 to 2016. Evidence suggests that
the amount of proceeds raised, lockup period length, Debt-to-Assets ratio, bookrunner
participation and average IPO returns at the time of listing are significant determinants of
delisting for the UK, while the rest of the European delistings are related to factors such
as the age of the company at the time of IPO, lockup period length and reputation of the
auditors involved. The common attribute – lockup period length – affects delisting
negatively in Europe and positively in the UK. Less researched analyst recommendations
are proved to be insignificant determinant of delisting. The findings support that financial
systems assessed in the research are different from a delisting perspective as well.”8

“This paper presents an empirical analysis of firms that are delisted from a major stock
exchange. The delisting process is described and stock price movements surrounding
delisting are analyzed. For firms with prior announcements, equity values decline by
approximately 8.5 percent on announcement day. For firms without prior announcements,
a similar adjustment takes place between the last day of trading in the initial market and

7
Dr. Xhensila Kadi Faculty of Law, University of Tirana. vol.12, No.4 ISSN: 1857 – 7881
8
Elvis Krastiņš. DETERMINANTS OF DELISTING: THE CASE OF EUROPEAN STOCK EXCHANGES.
SSE Riga Student Research Papers 2017 : 6 (193) ISSN 1691-4643

29
the close of the first day of trading in the new market. Four hypotheses concerning the
decline in firm value are examined. These are the liquidity hypothesis, the management
signalling hypothesis, the exchange certification hypothesis, and the downward sloping
demand curve hypothesis. Evidence consistent with the liquidity hypothesis is presented
in the paper. Unlike evidence on stock exchange listings, returns in the post-delisting
period do not appear to be anomalous.”9

“Since 1995 more than 7300 firms have delisted from U.S. stock markets, with almost
half of these being involuntary. This paper examines the law and economics of the
delisting process. We examine economic rationales for delisting, the legal rules that
define it, and the causes of delisting. Using a sample of NYSE firms delisted in 2002, we
examine the effects of their delisting and subsequent trading on the Pink Sheets. We find
huge costs to delisting, with percentage spreads tripling, volatility doubling, but volume
remarkably high. We also show that delisting is applied inconsistently, with some firms
trading for months after failing the listing requirements. We argue that the current
delisting process is flawed, and we provide some alternatives.”10

“From the perspective of the modern market, a successful business must be able to
effectively perform competing business activities and must be endowed with various
manoeuvre or business strategies. A business can endeavour to achieve this aim only with
sufficient investment and a larger market share. Therefore, in order to pace up with the
current economic situation the companies are frequently acquiring other companies to
enhance their production efficiency, cost effective marketing of their products and

9
Gary C. Sanger and James D. Peterson. The Journal of Financial and Quantitative Analysis.
Vol. 25, No. 2 (Jun., 1990), pp. 261-272

10
Jonathan Macey Yale Law School. Down and Out in the Stock Market: The Law and
Economics of the Delisting Process November 2003

30
services and to beat the stiff competition existing in the corporate space. Takeovers are
one of the most dynamic decisions taken in business practice. Therefore, there is a need
to exhaustively examine the legal provisions governing takeovers and its procedure. The
study strives to have a deeper insight into the concept and legal framework in Takeover
of business for the protection of the rights of shareholders or investors. The existing
Takeover Regulations ensure that every member of the target company is given equality
of treatment and opportunity during a takeover procedure. Also, they provide for the
provisions for voicing of the dissenting views of the minority shareholders who do not
agree to the takeover decision of the company. Thus, Takeover of listed companies is a
complex procedure which must be effectively codified in a country without any space for
ambiguity. Therefore, there is a need to look into the legal framework of developed and
developing countries for coming up with a robust mechanism to regulate takeovers. The
scope of this article is the comparative study between the Corporate/ Security laws of
India, UK and USA regulating the takeovers of companies within their specific
jurisdictions.”11

“The new norms for delisting provide that the delisting would be effective only if
promoters hike their stake to 90% or purchase 50% through purchase offer. Further it
provides for reverse book building process. Besides, the Securities and Exchange Board
of India (SEBI) has framed conditions for stock exchanges in the cases of compulsory
delisting, and has made special provisions for cases related to delisting of small
companies and those necessitated due to factors like winding up and de recognition. The
present research paper aims to explain the regulation for delisting of equity shares. It
discusses the provisions pertaining to voluntary delisting, compulsory delisting, delisting
for small companies and delisting by operation of law. Further the paper critically

11
Jyoti Gautam. Intl.J.Adv.Res.Comm&Mgmt.March2018;4(1): 10-27 ISSN: 2395-0749.

31
analysis that how far the new regulation has benefitted companies, small companies and
investors.”12

“Underpricing in IPOs is one of the widely studied areas of finance. The regulatory
framework governing the IPOs is a deciding factor that can increase or reduce
underpricing in IPOs. The regulatory framework is a guiding light for the investor to take
fair decisions and also exercises strict control on the issuing firm. The pricing
mechanism, through which the shares are issued, is one of the main regulatory guideline
which affects the IPO underpricing. Fixed pricing and book building are the two most
widely used pricing mechanism for the issue of IPOs. The shares can also be issued by
using auction pricing but it is not much used and is applicable to some countries. This
paper is an attempt to find out what major changes have been made in the regulatory
framework for the issue on an IPO in India and to study the impact of regulatory
framework on IPO underpricing.”13

“This paper provides a literature review of the delisting phenomenon in the US, the UK
and Continental Europe. Delisting is defined as the removal of a listed company from a
stock exchange, but the phenomenon is characterized by a great heterogeneity. The
observed heterogeneity in delistings leads us to address a fundamental question: why
would a firm be delisted from the stock exchange during its lifetime? Analysis of the
reasons for delisting in a cost-saving perspective leads us to define two different levels of
delisting. In the case of a voluntary delisting, firms are facing an increase in listing costs
and decide to opt out of the stock exchange in order to avoid these costs. In the case of an
involuntary delisting, firms are no longer able to manage their costs and forced to delist.
12
Kajal Babaria. Analysis of SEBI Regulations for Delisting of Equity Shares. Volume-2, Issue-6,
June-2015 ISSN: 2349-7637

13
Lalit Bhalla. Scholars Journal of Economics, Business and Management 1(4):142-156 ISSN
2348-5302

32
Involuntary delisting can thus be viewed as a different level from voluntary delisting.
These differences suggest that it is relevant to consider the economic consequences type
of delisting, and this paper also addresses this issue.”14

“Securities and Exchange Board of India has issued the SEBI (Delisting of Securities)
Guidelines 2003‟ for delisting of shares from stock exchanges. National Stock Exchange
now provides online reverse book building for promoter/ acquirer through its trading
network which spans various cities and towns across India. The Reverse Book Building is
a mechanism provided for capturing the sell orders on online basis from the share holders
through respective Book Running Lead Managers (BRLMs) which can be used by
companies intending to delist its shares through buy back process. It is now felt that the
reverse book-building process would provide the transparent and fair mechanism to
determine an exit price for de-listing of securities and would ensure investors'
participation in the whole de-listing process.”15

“Stock exchange in Tanzania has become an important venture for improving income
of individuals and firms. There are however few firms that have listed shares with the
DSE. The number of firms that have listed shares with the DSE suggest for two
propositions among others: 1) that few managements of firms do know the benefits for
listing shares. 2) That individuals who have subscribed shares with the firms do not know
the benefits articulated through listing shares with the DSE. The reality is that there are
many benefits for listing securities with the Dar es Salaam Stock Exchange (DSE).
Hence this paper provides a discussion on the benefits for listing shares in Tanzania. It
entails to narrate on the importance for listing shares as opposed to not listing. The paper

14
MARTINEZ Isabelle. Reasons for delisting and consequences ISSN- 1220-3245

15
Ms. Varsha Kshirsagar, Savitribai Phule Pune University, Assistant Professor, Sinhgad College
of Science, Pune. Volume-4, Issue-12, Dec-2015 • ISSN No 2277 – 8160

33
utilizes documentary and art facts data collection strategies to arrive at the conclusion it
sets. The paper concludes that there are generally three types of benefits. 1) Those
related to the firms improving their financial status/capital 2) Benefits resulting from
waver of various taxes imposed by laws and 3) Benefits of financial liquidity and
improved market for goods and services produced by the listed firm. ”16

“Traditionally, the capital market has attracted the interest of scholars and researchers,
motivated to understand the process of going public and trading securities of companies
on a stock exchange. In this research context, an aspect had been neglected, something
which indi cates a gap in the body of knowledge about the capital market and corporate
governance: delisting of companies. We aim to identify the determining factors for
delisting companies from the Commodity & Futures Exchange BOVESPA
(BM&FBOVESPA). Methodologically, this research has related a set of variables
collected from secondary data available on the database of the Securities Commission of
Brazil (CVM), BM&FBOVESPA, and Economatica. By analyzing 227 listing
cancellations, between 2001 and 2012, the results indicate that de listing of companies
from BM&FBOVESPA is determined by the following factors: (i) greater concentration
of ownership and control; (ii) lower free float; (iii) lower liquidity of shares; (iv) greater
availability of cash; and (v) larger size. The fact that the controlling shareholder is a
public or private company determines significant differences in the decision to delist.
While in the first case cash availability is the most important factor, in the second
liquidity is the main determining factor for delisting. From the academic viewpoint, this
research extends the studies on delisting, still incipient in the Brazilian capital market
context. For the capital market, identifying the characteristics of companies prone to

16
Norman, A.S. (PhD) Faculty of Business and Economics. JULY 2011. VOLUME 3. NUMBER 1,
ISSN- 1221-2033

34
cancel listing may prevent investors concerned about inherent risks at the time of
acquiring shares by the controlling group interested in delisting.”17

17
Patricia Maria Bortolon. Determining Factors for Delisting of Companies Listed on
BM&FBOVESPA. vol.26 no.68 ISSN 1519-7077

35
SAMPLING
STRATEGY

36
 SAMPLING STRATEGY

UNIVERSE:

Stock market in India.

TARGET SAMPLE:

Delisted Companys Share in India

SAMPLING METHOD:

The research is fully based upon historical data.

37
DATA ANALYSIS

38
 DATA ANALYSIS

GRAPH 1.1: TREND OF THE NUMBER OF COMPANIES THAT HAVE DELISTED

IN THE PERIOD 2001 TO 2007.

2001 2002 2003 2004 2005 2006 2007

YEAR

Source- Bombay Stock Exchange official website-www.bseindia.com

It was observed that 41 companies were delisted in the year 2001. This saw a huge jump
to 175 companies in 2002. The trend remained low in 2003 but the year 2004 was a big
year where SEBI delisted 977 companies. 2005 and 2006 still saw a sizeable number of
companies getting delisted.

39
GRAPH 1.2: TREND OF THE NUMBER OF COMPANIES THAT HAVE DELISTED
IN THE PERIOD 2008 TO 2016.

60

50 51

40
No. of Companies

38

30 31 30
27
25 24 25
20 19

10

0
2008 2009 2010 2011 2012 2013 2014 2015 2016
Year

Source- Bombay Stock Exchange official website-www.bseindia.com

In the year 2008, 51 companies got delisted while in 2009, there was decline in the
companies getting delisted. The year 2014 saw just 19 companies getting delisted. The
year 2004 saw a huge spurt in the number of companies getting delisted i.e.977
companies got delisted in the year of which 876 companies were compulsorily delisted
by SEBI for non-compliance with regulations.

40
GRAPH 2.1: TREND OF THE NUMBER OF COMPANIES THAT HAVE DELISTED
DUE TO SEBI DELISTING NORMS

10
10
9
8
7 6 6
No.of companies

6 5
5
4
3
2 1
1 0 0
0
2010 2011 2012 2013 2014 2015 2016
Year

41
Reasons for Involuntary Delisting

1) Non Payment of Listing Fees

For initial listing, every listed company is required to pay fees to each Stock Exchange on
which its securities are listed. Annual listing fees are also payable every year. Many
companies default on the payment of annual listing fees to the Stock Exchanges. This
breach of the Listing Agreement enables the Stock Exchange to resort to compulsory
delisting of the securities of the defaulting company. Delisting has been resorted to due to
non-payment of the annual listing fees in over 95% cases.

2) Non Compliance with listing requirements:

BSE has set various guidelines and forms that need to be adhered to and submitted by
new companies and companies delisted by BSE seeking Relisting on BSE. Some of the
requirements revolve around minimum post issue paid up capital, submission of letter of
Application, depositing 1% of issue amount with Stock Exchange before issue opens, etc.
Penal action is taken against defaulting companies and a company maybe compulsorily
delisted for disregarding these requirements.

3) Non Compliance with Listing Agreement

All Issuers whose securities are listed on the Stock Exchange shall comply with the
listing conditions and requirements contained in the Listing Agreement Form or such
other conditions and requirements as the Relevant Authority may from time to time
prescribe in addition thereto or in modification or substitution thereof. Non Compliance
with Listing Agreement may lead to compulsory delisting of a company. The year 2004
saw a huge spurt in the number of companies getting delisted i.e.977 companies got
delisted in the year of which 876 companies were compulsorily delisted by SEBI for non-
compliance of with the regulations etc.

42
Reasons for Voluntary Delisting

GRAPH 3.1: TREND OF NUMBER OF COMPANIES THAT HAVE DELISTED

VOLUNTARILY

14
14

12
10 10
10
No. of Companies

8
6
6

2 1 1
0
0
2010 2011 2012 2013 2014 2015 2016
Year

1) Obtaining full ownership:

The most common reason for voluntary delisting of shares is to obtain full ownership of
the company, which is seen to provide the promoters with increased operational
flexibility to support company‟s business needs and to provide exit opportunity to the
public shareholders of the company.

Example: Shares of Alfa Laval India were discontinued , pursuant to a delisting offer
made by its promoter, Sweden-based Alfa Laval Corporate AB, for the public
shareholders as its Swedish parent joined a host of other multinational companies
(MNCs) to delist their local units from the Indian stock market. The stock market has
witnessed a slew of delisting and the promoters have been MNCs for most of these
entities. Some of the entities having announced or got delisted include IT firm Patni
Computer, media and entertainment firm UTV Software Communications, Carol Info

43
Service and Exedy India. Market experts attributed the trend to an opportunity for the
promoters to buy out the minority public shareholders at low valuations prevailing
currently.

2) Cost Saving:

A Listed Company finds the listing fees payable to the stock exchanges, legal fees and
other compliance costs burdensome and disproportionate to the benefits accruing to the
company or its stock holders.

3) Geographical Impracticality:

Regional imbalance of the holders of the securities either due to shifting of the
companies registered office and / or location of manufacturing unit, or for any other
reason.

4) Obsolescence:

The company may choose to delist if negligible trading or total absence of trading
prevails for a considerable long period of time. The company could have either
suspended its business or may be under closure or has become sick industrial company.

5) Mergers & Acquisitions:

Following the closure of the transaction of a merger between two companies, the
aqcuiree or merging company, gets delisted from the stock exchange and only shares of
the company resulting after the merger or acquisition are traded.

44
HYPOTHESIS
TESTING

45
 HYPOTHESIS TESTING

Set 1:
H0: There is Decrease in Trends of Delisting of Listed companies in India
H1: There is Increase in Trends of Delisting of Listed companies in India
GRAPH 4.1: TREND OF THE NUMBER OF COMPANIES THAT HAVE DELISTED IN THE
PERIOD 2008 TO 2016.

60

50 51

40
No. of Companies

38

30 31 30
27
25 24 25
20 19

10

0
2008 2009 2010 2011 2012 2013 2014 2015 2016
Year

Source- Bombay Stock Exchange official website-www.bseindia.com

Findings: As we can see in the above chart the trend of delisting was more in 2008 and by
2016 it came down hence we can easily say that there is a decreasing trend of delisting of
listed companies in India.
Hence we accept H0 and decline H1

46
Set 2:
H0: SEBI rules and regulations are forcing listed companies to go for involuntary
delisting.
H1: SEBI rules and regulations are not forcing listed companies to go for involuntary
delisting.
GRAPH 4.2: TREND OF THE NUMBER OF COMPANIES THAT HAVE DELISTED DUE
TO SEBI DELISTING NORMS

10
10
9
8
7 6 6
No.of companies

6 5
5
4
3
2 1
1 0 0
0
2010 2011 2012 2013 2014 2015 2016
Year

Findings: As we can see in the above chart the number of companies delisted due to SEBI
delisting norms were 6 for both years 2010 and 2011 and then it started decreasing and
by 2013 to 2014 there were 0 companies which were delisted due to SEBI delisting
norms at 2015 there were 10 companies which got listed due to frauds and lated at 2016 it
decreased to 5 companies which indicates that Listed Companys are now more aware of
SEBI rules and regulations.

Hence we accept H0 and reject H1

47
LIMITATIONS

48
 LIMITATIONS

1. Only Bombay Stock Exchange is taken for the study.

2. The data is collected from BSE website and may differ from site to site.

49
CONCLUSION

50
 CONCLUSION
A decreasing trend of delisting among the companies in India is being witnessed.
Companies are becoming more and more conscious about the norms of the country.
Stringent punishment and strict action by the authorities has been seen. One such
example is the year 2004 where BSE saw a delisting of 977 companies at one stroke
majority of them due to non-compliance with norms and guidelines. Rapid and non-
sensitive actions by authorities have made companies more conscious.

The reasons for the fall in the number of companies getting delisted are

1. Rapid action by SEBI has made the companies well aware of the risk of losing a listing
on Stock exchange. Companies know that investors have used their hard earned money
because they believed in the organization and also with the aim of earning capital gains.
The Income Tax act has been providing exemption to Long Term Capital Gains but only
on those shares which are listed on recognized Stock Exchanges. Delisting means losing
this exemption, hence investors become wary of taking risks even in the future.

2. The companies have become well aware about the cost that has to be incurred to carry
out delisting. This can cost a fortune. Companies try to avoid these costs and believe in
maximizing shareholder‟s wealth.

3. SEBI has softened its stand on the procedures on norms because of the development
friendly attitude of the Government over the years, which has helped Companies embrace
the softened norms easily.

4. SEBI has become more investor friendly too and thus companies who get delisted tend
to suffer for the protection of rights of investors in them.

5. The fear that delisting plan might not be approved or it may fail to garner the interest
needed which leads to a financial burden on the organization not only in terms of
repayment to the shareholders but also the legal expenses. This can also affect the
credibility of the organization.

51
RESEARCH
PROPOSAL

52
 RESEARCH PROPOSAL

EXECUTIVE SUMMARY

Delisting denotes removal of the listing of the securities of a listed company from the
Stock Exchange. Delisting differs from suspension or withdrawal of admission to
dealings of listed securities, which is for a limited period.

„Suspension‟ of trading in securities means that no trade can take place in the securities
of the company suspended for a temporary period. Suspension is not done at the instance
of company but it is action taken by the Stock Exchanges against the company, generally
for non-compliance of listing conditions as stipulated under SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015 (LODR Regulations). Once, the
company makes good the compliance of the listing conditions under LODR Regulations,
stock exchange withdraws suspension and permits trading. Stock exchanges may impose
fines or freeze promoter/promoter group holding of designated securities, as may be
applicable in coordination with depositories at the instances of non-compliance with
LODR Regulations.

On the other hand, „delisting‟ of securities means removal of the name of the company
from the stock exchange and no trade can take place in the securities of the company
delisted. Delisting of securities can be done either by company voluntarily or by the stock
exchange, compulsorily. Generally stock exchanges, in order to impose severe
punishment on companies compulsorily delist securities of any company, as a last resort.
Compulsory delisting affects reputation of company. Delisting of securities may be of
two types, namely, voluntary delisting and compulsory delisting. In the case of voluntary
delisting, a listed company seeks of its own volition for the delisting of its securities;
while in case of compulsory delisting, the Stock Exchange itself delists the securities of
such Company.

PROBLEM STATEMENT:

53
“Voluntary and Non voluntary delisting is done by companies so to understand the
reasons behind it the study is conducted.”

RESEARCH OBJECTIVES:

To Analyse trend of listed companies who have opted for delisting.

To identify the reasons for delisting.

HYPOTHESIS:

Set 1:
H0: There is Decrease in Trends of Delisting of Listed companies in India
H1: There is Increase in Trends of Delisting of Listed companies in India

Set 2:
H0: SEBI rules and regulations are forcing listed companies to go for involuntary
delisting.
H1: SEBI rules and regulations are not forcing listed companies to go for involuntary

CONCLUSION DERIVED AFTER HYPOTHESIS TESTING:

The trend in Delisting of Shares in India is decreasing yearly and the Company‟s now a
days are more aware of SEBI rules and regulations.

Name of the Researchers Qualification Experience

Karan Bhosle MMS – 4th Sem Fresher

54
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55
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WEBSITES:

www.google.co.in

www.sebi.gov.in

www.investopedia.com

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