Understanding Delisting of Shares & its impact

When you invest in the stock market, you expect your shares to continue trading freely on the exchange. But there are times when a company decides—or is forced—to remove its shares from the stock exchange. This process is known as delisting.

For many investors, delisting can feel unsettling, especially if they’re unsure what happens next. Let’s break it down in a simple, human way.

What Is Delisting?

Delisting means a company’s shares are no longer available for trading on stock exchanges like NSE or BSE. Once delisted, you cannot buy or sell that stock on regular exchanges.

Delisting can happen in two forms:

1. Voluntary Delisting

This happens when the company itself chooses to delist—often because the promoters want full ownership, the company plans restructuring, or a merger/acquisition is happening.

2. Compulsory Delisting

Here, the exchange removes the company from trading due to non-compliance—such as failure to meet regulatory norms, financial instability, or extended suspension of trading.

Why Do Companies Delist?

A company may delist for several reasons:

• Promoters want to increase their stake and go private
• Mergers, acquisitions, or restructuring
• Regulatory non-compliance
• Low trading volumes
• Poor financial health
• Strategic business decisions (e.g., shifting focus elsewhere)

Each reason carries different implications for investors.

Impact of Delisting on Shareholders

1. Buyback Offer to Shareholders (Voluntary Delisting)

In a voluntary delisting, the company must offer to buy shares from public shareholders at a fair price. This is done through a reverse book-building process, where shareholders quote the price they expect for their shares.

If the promoters accept the discovered price, shareholders receive the amount and exit.

2. Shares Become Illiquid

If the delisting is compulsory, shareholders don’t get a buyback offer. The shares continue to exist, but trading shifts to the over-the-counter (OTC) market, where finding buyers is extremely difficult.

3. Difficulty in Exiting the Investment

Post-delisting, selling your shares can take months—or sometimes never happen—because liquidity is extremely low.

4. Impact on Share Value

Delisting doesn’t always mean loss. If a financially strong company delists voluntarily, investors might receive a premium.
But compulsory delisting usually signals trouble, which negatively affects the value of the shares.

5. You Still Remain a Shareholder

Delisting doesn’t take away your ownership. You continue to hold the shares, receive dividends (if any), and have rights—but liquidity becomes a challenge.

Should You Worry About Delisting?

Not always.
If a reputed company delists voluntarily, investors often get a decent exit price. But if a company is delisted due to compliance failures or bankruptcy risks, then it’s a red flag.

The key is staying informed, monitoring company announcements, and having a clear exit strategy.

FAQs

1. Do I lose my shares after delisting?

No. You still remain the shareholder, but the shares cannot be traded on NSE/BSE.

2. Will I get money if a company delists?

Only in voluntary delisting, where the company provides an exit offer. In compulsory delisting, no such offer is guaranteed.

3. Can I sell delisted shares?

Yes, but only in the OTC market, which has very low liquidity.

4. Is delisting always bad?

Not necessarily. Some delistings give shareholders a good premium, but compulsory delistings are generally risky.

5. How do I track delisted companies?

You can check updates on SEBI, NSE/BSE websites, or through your broker.