Sebi's Proposal for Delisting PSUs Faces Flak

Legal experts say that the move risks creating a dual regulatory standard between PSUs and private sector firms

- Neha Joshi

A new proposal by the Securities and Exchange Board of India (Sebi) to create a special delisting route for public sector undertakings (PSUs) with 90% or more government ownership has stirred a broader debate on regulatory parity between state-owned and private companies.

The proposal would essentially allow the PSU to delist itself, either to go private, merge with another company, or because the costs of being publicly listed outweigh the benefits.

Sebi said the move would benefit PSUs with very low public shareholding and/or weak financials, as noted in the 6 May consultation paper.

It reasoned that the proposal could help profitable firms that lack long-term business prospects due to outdated product lines or government decisions to sell or shut down specific units.

Legal experts and market participants say that while the move could fast-track the government's disinvestment plans and simplify the exit process for illiquid state-owned firms, it risks creating a dual regulatory standard between PSUs and private sector companies.

"The delisting regulations are intended to benefit the market and its various participants—as a general principle, any carve-out should be made available equally to all listed companies," said Abhishek Dadoo, partner at Khaitan & Co.