Recently, the board of Adani Power Ltd approved the delisting the company’s public shares from stock exchanges. Company has decided the floor price of ₹33.82/share to buy back the shares from public shareholders. Let’s understand what delisting means how will it impact shareholders and the company?
Crux of the Matter
What Is Meant By Delisting?
Delisting means the removal of stock from the stock exchange, meaning the stock will no longer trade on specified stock exchanges. There are two types of delisting i.e Voluntary and Involuntary. Delisting can happen due to various reasons such as bankruptcy, failure to comply with exchange laws, takeover, merger, and lower than required stock price, etc.
Voluntary delisting is when a company buys back the public shares at the decided floor price. Such delisting is only considered successful when the company acquires 90% of the total shares. Whereas, Involuntary delisting is when directors, promoters, and/or firm are banned from accessing the securities market. In this case, promoters are under compulsion to purchase the shares from public shareholders.
Adani’s Decision To Delist
The board of Adani Power approved the voluntary delisting of its shares from the Bombay Stock Exchange and the National Stock Exchange. Adani Power Limited is the power business subsidiary of Indian conglomerate Adani Group. It is India’s largest private thermal power producer.
Experts say that the low performance of the share price makes it difficult for the company to borrow more money. Thus, by delisting it can improve the share price, which will help it borrow more at a time when interest rates are low.
But, public shareholders will be negatively impacted by it as investors holding the stock since IPO will have lost ~60% of their investment – without even taking into consideration the time value of money for 11 years – if the company buys back shares at ~₹40.
- Mundra Thermal Power Station is one of the coal-based power plants of Adani Power. Located at Mundra in Kutch district from Gujarat, it is the world’s 11th-largest single location coal-based thermal power plant as well as India’s second largest operational power plant after NTPC Vindhyanchal.
- In 2017, Adani Power was named the Most Innovative Young Power Professional by IPPAI at the 18th Regulators & Policymakers Retreat. And in 2018, it received the Recognition for Best Environment Management practices by Srishti Publications.
- Adani Green Energy Limited (AGEL) is an Indian renewable energy company owned by Adani Group. In May 2020, Adani won the world’s largest solar bid by the Solar Energy Corporation of India (SECI) worth $6 billion.