How to participate in a delisting offer on Zerodha

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A delisting offer is a corporate action in which a company proposes to remove its shares from one or both stock exchanges, typically because the promoters wish to take the company private. When a company is delisted, its shares no longer trade on the exchange, which means remaining shareholders lose liquidity in their investment.

SEBI’s (Delisting of Equity Shares) Regulations, 2021 govern voluntary delisting. Under these regulations, the acquirer (promoter or acquirer entity) must:

  1. Offer to purchase shares from all public shareholders through a reverse book building (RBB) process.
  2. Pay at least the floor price (calculated under the formula specified in SEBI’s regulations).
  3. Achieve a minimum post-offer promoter shareholding of 90% for the delisting to succeed.

Zerodha facilitates delisting bid submission through the exchange’s reverse book building platform, charging a corporate action order fee of Rs 20 plus GST per bid.

Conflict-of-interest disclosure: WebNotes is an independent information publisher with no commercial arrangement with Zerodha.

Prerequisites

  • An active demat account with Zerodha at CDSL.
  • Shares of the company proposing delisting, held in the Zerodha demat account.
  • Kite access to submit the bid during the reverse book building window.
  • Review of the public announcement and Letter of Offer published by the acquirer.

Regulatory framework

SEBI (Delisting of Equity Shares) Regulations, 2021

Key provisions:

  • Floor price: The minimum price at which the acquirer must offer to buy shares. Computed as the higher of: (a) VWAMP for 60 trading days before board resolution; (b) highest price paid by acquirer in the last 26 weeks; (c) book value per share; and (d) other factors as specified. The floor price acts as the lowest acceptable bid price in the RBB.
  • Reverse book building: Public shareholders submit bids at or above the floor price, indicating the minimum price at which they are willing to sell. The clearing mechanism discovers the price at which 90% promoter holding is achievable (the “discovered price”).
  • 90% threshold: For delisting to succeed, after accepting all bids at or below the discovered price, promoter shareholding must reach at least 90%. If not achieved, the delisting fails.
  • Fixed price option: For companies with a small public shareholding or those meeting specific criteria under the 2021 Regulations, a fixed price route (without RBB) is available. The acquirer announces a fixed price and buys all tendered shares at that price.
  • Exit window for remaining shareholders: After a successful delisting, SEBI mandates an exit window (typically 1 year) during which public shareholders who did not participate in the RBB can still sell their shares to the acquirer at the discovered price.

Step-by-step: participating in a delisting offer on Zerodha

Step 1: Monitor the public announcement

Delisting announcements are made via:

  • Exchange disclosures (NSE and BSE).
  • Public announcements in major newspapers.
  • SEBI’s SCORES platform.

The announcement discloses the floor price, the RBB schedule (opening and closing dates), and the name of the merchant banker managing the offer.

Step 2: Review the Letter of Offer

The Letter of Offer details:

  • The rationale for delisting.
  • Floor price and methodology.
  • The RBB window (typically 3 to 5 working days).
  • The escrow details (confirming funds are available to pay all shareholders at the discovered price if delisting succeeds).

Step 3: Decide on a bid price

In the RBB, you submit a bid price, the minimum price per share at which you are willing to sell. Key considerations:

  • You cannot bid below the floor price.
  • You can bid at the floor price (highest chance of acceptance but may be at the lowest acceptable price).
  • You can bid at a premium to the floor price (seeking a higher exit price, but risk that the discovered price is lower and your bid is unaccepted).
  • The discovered price is the price at which cumulative bids (from the highest price down) cover enough shares to push the promoter to 90% holding.

Step 4: Submit the bid on Kite

  1. Log in to Kite at kite.zerodha.com.
  2. Navigate to “Corporate Actions” and select the delisting offer when it is active.
  3. Enter the number of shares to bid and the bid price (at or above the floor price).
  4. The tendered shares are blocked in your CDSL demat account during the RBB window.
  5. Zerodha charges Rs 20 plus GST for submitting the bid.
  6. Retain the bid confirmation number.

Step 5: Bid modification and withdrawal

Under the SEBI Delisting Regulations, shareholders may revise bids (upward or downward, subject to floor price) or withdraw bids during the RBB window before the bid closing time. Use the same Kite corporate action section to revise or cancel the bid before the RBB closes.

Step 6: Outcome and settlement

After the RBB closes:

If delisting succeeds (promoter shareholding reaches 90%):

  • The discovered price is announced.
  • All shareholders who bid at or below the discovered price have their shares accepted at the discovered price.
  • Payment is credited to the Zerodha trading account within the settlement cycle (typically T+5 from the RBB close date).
  • Shares blocked in the demat account are transferred to the acquirer.

If delisting fails (90% threshold not achieved):

  • All tendered bids are returned; shares are unblocked in the demat account.
  • The company remains listed on the exchange.
  • No payment is made; no fee is refunded (the Zerodha Rs 20 fee is charged regardless).

Step 7: Exit window for non-participants

If the delisting succeeds and you did not participate in the RBB, SEBI mandates a post-delisting exit window (minimum 1 year). During this period, you may submit your shares to the acquirer at the discovered price. The acquirer is obligated to buy shares during this window at the RBB discovered price. After the exit window closes, the acquirer is no longer obligated, and you are left with illiquid shares.

What can go wrong

Delisting fails: If the 90% threshold is not met, the delisting process fails. Your shares are returned to free holdings, and the company remains listed. This can happen if public shareholders collectively withhold their shares, demanding a higher price.

Bid price above discovered price: If your bid price is higher than the discovered price, your bid is not accepted (even if the delisting succeeds). Your shares are returned, and you remain a shareholder in a now-delisted company.

Missing the RBB window: The RBB window is short (3 to 5 working days). If you do not submit a bid during this period, you can still use the exit window after a successful delisting, but you forego any negotiating power.

Illiquidity after delisting: If you do not participate in the RBB and do not use the exit window, your shares become illiquid. Off-market transfers may be possible but are cumbersome and depend on finding a buyer.

Tax treatment

Proceeds from accepted bids

Delisting tender proceeds are taxed as capital gains:

  • Sale consideration = discovered price per share (for accepted bids) or the fixed price (for fixed price route).
  • Cost of acquisition = original purchase price of the shares.
  • Holding period = from original purchase date to the date of acceptance/settlement.

Capital gains tax:

  • STCG (held 12 months or less): 15% under Section 111A if settled through exchange with STT; otherwise at applicable slab rate.
  • LTCG (held more than 12 months): 10% under Section 112A on gains above Rs 1 lakh (if STT paid on exchange settlement).

For delisting transactions where settlement is through the exchange platform, STT is applicable, and Sections 111A and 112A apply. For off-market or non-exchange settlements, the applicable rates differ; consult a chartered accountant.

For pre-January 2018 holdings, see the grandfathering rule for LTCG.

References

  1. SEBI (Delisting of Equity Shares) Regulations, 2021, Regulations 8, 9, 19, 20, 21, 22.
  2. SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2021/44, implementation guidelines for 2021 Delisting Regulations.
  3. Income Tax Act, 1961, Sections 111A and 112A, capital gains on delisting proceeds.
  4. NSE/BSE reverse book building platform operational guidelines.
  5. Zerodha support documentation, delisting bid submission on Kite.
  6. SEBI SCORES platform, delisting offer announcements and grievance mechanism.

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The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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