list and delist shares from company
companies register share at stock exchange and holding their shares at SEBI, got money from IPO, and doing business( percentage of company investment, investment from public via ipo?), after doing business, every year some they give dividend on profit to ipo share holders , some not( why?, exaplain clearity?), this amount is very less then bank fd investment, ( in such case, what is reason for investing in ipo,or buying shares in secondary market, if bonous is less from company) if captial gain on share( is it virtual business, without getting profit from company productivity, by selling and buying share in secondary market? is it good way of earning money, since we are not taking money from company productivity,? explain clearly on this, howlong this company share will be with sebi, is there any time to close from public?
ChatGPT said:
Understanding How IPOs, Shares, and the Stock Market Work
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Company Investment vs. Public Investment via IPO
- A company needs funds to grow its business. It can raise money through debt (loans, bonds, etc.) or by selling a portion of ownership to the public via an Initial Public Offering (IPO).
- In an IPO, the company issues shares to the public and receives money in return. This money is used for expansion, R&D, debt repayment, etc.
- After the IPO, shares are traded in the secondary market (stock exchanges), where investors buy and sell shares among themselves. The company does not receive money from these transactions.
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Why Do Some Companies Pay Dividends and Others Don't?
- Dividends are a portion of a company's profit paid to shareholders.
- Some companies reinvest their profits for future growth instead of paying dividends (e.g., tech companies like Amazon, Tesla).
- Others, especially mature companies with stable earnings, distribute a part of their profits as dividends (e.g., TCS, Infosys).
- If a company is not making profits or wants to expand aggressively, it may not pay dividends.
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Why Invest in IPOs or Buy Shares in the Secondary Market?
- Dividends alone are not the main reason for investing in stocks. The main benefit comes from capital appreciation (stock price increase).
- If a company's business grows, its stock price usually increases over time, providing capital gains to investors.
- Even though fixed deposits (FDs) offer guaranteed returns, stock market investments have higher long-term returns (though with higher risk).
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Capital Gain: Virtual Business or Real Growth?
- Capital gains are not just virtual—they reflect investors’ expectations about the company’s future growth.
- If a company grows its revenue, expands, and increases profits, its stock price rises, which benefits shareholders.
- However, short-term price changes can be speculative (influenced by demand-supply, market sentiment, etc.).
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Is Buying and Selling Shares a Good Way to Make Money?
- Stock trading (short-term buying/selling) is risky and often speculative.
- Long-term investing (holding fundamentally strong stocks for years) is how most investors build wealth.
- Some investors trade based on technical analysis (price patterns), while others invest based on business fundamentals.
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How Long Will a Company’s Shares Be with SEBI?
- Once a company is listed, its shares remain public unless it chooses to delist (buy back shares and go private).
- Delisting can happen due to mergers, acquisitions, financial issues, or strategic decisions.
- Companies must comply with SEBI regulations and maintain transparency in their operations as long as they are listed.
Final Thoughts
- Investing in stocks is not just about dividends—it’s about owning a part of a growing company.
- While capital gains can sometimes be speculative, in the long run, strong companies generate real value and wealth for investors.
- The stock market rewards patient investors who focus on business fundamentals rather than short-term price movements.
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- suppose if any companes wants to delist, investors are forced to sell? explain past exmple? and present process?
ChatGPT said:
What Happens When a Company Delists?
When a company decides to delist from the stock exchange, it means its shares will no longer be publicly traded. Delisting can be voluntary or involuntary.
1. Types of Delisting
✅ Voluntary Delisting (Company’s Own Decision)
- The company decides to exit the stock market by buying back shares from public investors.
- Reasons for voluntary delisting:
- The company wants to become private again.
- Mergers or acquisitions by another company.
- Promoters want to increase their stake and remove public shareholders.
- The company finds it costly to maintain compliance with SEBI rules.
❌ Involuntary Delisting (Forced by SEBI or Exchange)
- If a company fails to follow SEBI regulations, it can be removed from trading.
- Reasons for involuntary delisting:
- Financial fraud or mismanagement.
- Non-compliance with stock exchange rules.
- Continuous losses or bankruptcy.
2. Process of Voluntary Delisting (Current Rules)
As per SEBI (Delisting of Equity Shares) Regulations, 2021, the following process is followed:
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Board Approval:
- The company's Board of Directors approves the delisting plan.
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Shareholder Approval:
- The company must get approval from at least 90% of shareholders.
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Reverse Book Building (RBB) Process:
- A bidding process where investors quote the price at which they are willing to sell their shares.
- The company must offer a fair exit price to shareholders.
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Regulatory Approval from SEBI & Stock Exchange:
- SEBI reviews the process to protect investor interests.
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Final Payment to Shareholders:
- Public shareholders are paid and shares are delisted from stock exchanges.
- If an investor does not sell, they can still sell to the company for one year at the exit price.
3. Are Investors Forced to Sell?
- Yes, in most cases. Once delisted, the stock is no longer tradable on exchanges.
- Investors can sell their shares back to the company during the Reverse Book Building (RBB) process.
- If investors do not sell during the delisting process, they may struggle to find buyers later.
4. Examples of Delisting (Past & Present Cases)
🔴 Past Example: Vedanta Limited (2020-21) [Failed Delisting]
- Vedanta tried to delist in 2020 but failed because public shareholders did not agree to the price.
- The promoter group wanted to buy back shares at ₹87 per share, but investors demanded a higher price.
- SEBI rules protect investors by ensuring a fair exit price.
🔴 Present Example: Hexaware Technologies (2021) [Successful Delisting]
- The company was acquired by a private equity firm and delisted.
- Shareholders were paid ₹475 per share under SEBI’s Reverse Book Building process.
🔴 Current Delisting Consideration: Paytm (2024 Rumors)
- Due to regulatory issues and business concerns, some investors fear that Paytm might delist in the future.
- If Paytm decides to delist, it must offer a fair price to investors under SEBI regulations.
5. Risks & Considerations for Investors
✅ Good Exit Price: SEBI ensures investors get a fair price.
❌ No Future Trading: Once delisted, investors can’t trade on stock exchanges.
❌ Uncertain Market Price: After delisting, shares can be sold only in OTC (Over-the-Counter) markets, often at lower prices.
Final Thoughts
- Investors are not "forced" to sell, but practically, they must exit because shares lose liquidity after delisting.
- SEBI regulations protect small investors by ensuring a fair exit price.
- If a company is considering delisting, investors should carefully evaluate the offer and exit at the right time.
You said:
suppose, if any persons -x , buys mutural funds(amc -y) shares, if any company delist,(rbb period), person x does not worry about if any company delist ? right, explain?ChatGPT said:
Does Mutual Fund Investor (Person X) Need to Worry About Company Delisting?
If Person X has invested in a mutual fund managed by an Asset Management Company (AMC - Y), and one of the companies in that mutual fund gets delisted, here’s what happens:
1. Who Owns the Shares?
- Person X does NOT directly own shares of the delisting company.
- The mutual fund (AMC - Y) owns those shares as part of its portfolio.
- Person X only owns units of the mutual fund, not individual stocks.
2. What Happens When a Stock in the Mutual Fund Gets Delisted?
✅ If It’s a Planned Delisting (Voluntary Delisting)
- The mutual fund company (AMC - Y) will participate in the Reverse Book Building (RBB) process and sell its shares.
- The mutual fund will get cash from selling those shares and reinvest in other stocks or distribute it within the fund.
- Person X does not need to worry because the mutual fund manager handles everything.
❌ If It’s a Forced Delisting (Fraud, Bankruptcy, SEBI Action)
- The mutual fund may suffer a loss if the stock loses value before delisting.
- The AMC cannot sell the stock at a good price and may write it off as a loss.
- This could reduce the Net Asset Value (NAV) of the mutual fund slightly.
- However, since mutual funds invest in many stocks, the impact on overall returns is usually small.
3. Should Mutual Fund Investors Like Person X Worry About Delisting?
✅ No, if investing in a well-diversified mutual fund.
- The fund manager handles everything, and the delisting impact is usually minor.
❌ Yes, if heavily invested in a sectoral or concentrated fund.
- If the fund has high exposure to one company, delisting can impact returns.
4. Example of Mutual Fund Handling Delisting
🔴 Yes Bank Crisis (2020)
- Many mutual funds held Yes Bank shares before its financial crisis.
- When Yes Bank shares lost value and were nearly delisted, mutual funds suffered some losses but continued managing their portfolios.
- Investors in diversified mutual funds were not significantly affected.
✅ Tata Steel BSL Delisting (2021)
- Tata Steel BSL (Bhushan Steel) delisted after Tata Steel acquired it.
- Mutual funds received the delisting price and reinvested elsewhere.
- Investors in mutual funds did not need to do anything.
5. Final Answer: Should Person X Worry?
🔹 No need to worry—Mutual fund managers handle delistings professionally.
🔹 Risk is minimal in a well-diversified mutual fund.
🔹 Person X does not have to take any action, as the AMC takes care of selling the stock.However, if investing in single stocks or sector-focused mutual funds, Person X should monitor holdings and diversification.
You said:
as answered for all above questions, if person x , invested money in mutual fund y, if mutual fund wants to delist case, how does investor x , gets money as per sebi rules?ChatGPT said:
What Happens If a Mutual Fund (AMC - Y) Wants to Delist?
If Person X has invested in a mutual fund managed by AMC - Y, and the mutual fund decides to close or delist, here’s how the investor gets their money back under SEBI (Mutual Fund) Regulations, 1996 and SEBI’s latest guidelines.
1. Types of Mutual Fund Delisting (Closure)
A mutual fund can delist or shut down in two ways:
✅ Voluntary Closure by AMC (Mutual Fund Company)
- The AMC decides to close the mutual fund due to reasons like:
- Low investor interest or AUM (Assets Under Management).
- Merging with another fund.
- Strategic business decision to exit a category.
❌ Forced Closure by SEBI (Regulatory Action)
- SEBI forces the mutual fund to shut down due to:
- Mismanagement or fraud.
- Non-compliance with SEBI regulations.
- Extreme market conditions (like the Franklin Templeton case).
2. How Does Person X Get Their Money Back?
🔹 Case 1: Voluntary Closure (Planned Exit by AMC)
- The mutual fund will announce a winding-up date and allow investors to redeem units before closure.
- If investors don’t sell their units, the AMC will sell all fund assets (stocks, bonds, etc.) and return the money.
- Investors will receive money based on the final Net Asset Value (NAV) at the time of closure.
🔹 Case 2: Forced Closure by SEBI (Regulatory Action)
- If SEBI forces a fund to shut down, the AMC must liquidate holdings and return money to investors.
- SEBI appoints trustees to oversee the liquidation and protect investors.
- Investors receive money in multiple installments if the AMC cannot sell all assets immediately.
3. SEBI Rules for Mutual Fund Closure & Payout
✅ SEBI’s Mutual Fund Regulations Protect Investors:
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Mandatory Exit Window
- AMC must allow at least 30 days for investors to exit before final closure.
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Transparent Asset Liquidation
- The fund sells stocks, bonds, and holdings and distributes money to investors.
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Money Transfer to Investor's Bank Account
- Funds are credited directly to the investor’s linked bank account.
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Timeframe for Payouts
- If assets are easily liquidated, investors get money within 10–15 days.
- If selling assets takes time (like bonds or real estate), payouts happen in phases over months.
4. Example: Franklin Templeton Debt Fund Crisis (2020)
🔹 What Happened?
- Franklin Templeton India shut down 6 debt mutual funds in April 2020.
- It cited liquidity issues due to market conditions.
🔹 How Did Investors Get Their Money?
- SEBI appointed SBI Mutual Fund to handle payouts.
- Investors received installments based on asset sales.
- Full repayment took over a year due to liquidity challenges.
5. Final Answer: How Does Person X Get Money?
🔹 For Planned Delisting:
- Person X can redeem before closure or receive the final NAV payout after liquidation.
🔹 For Forced Delisting by SEBI:
- SEBI ensures payouts through trustees and AMC liquidation processes.
- Person X may get money in installments if liquidation takes time.
✅ SEBI rules protect investors, ensuring all money is returned in a fair and transparent manner.
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