Reverse book building

A book-built IPO asks investors what they will pay. A delisting asks them what they will accept. Reverse book building is the same machinery run backwards: the acquirer fixes a floor, public shareholders tender at prices at or above it, and the exit price emerges from what they ask for.

The context is voluntary delisting. Where a company's equity shares are proposed to be delisted and would not remain listed on any stock exchange having nationwide trading terminals, the issuer must provide an exit opportunity to existing shareholders — and where an exit opportunity is required, the offer price is determined through reverse book building, after fixing a floor price.

The reference date for calculating the floor price is the date of the initial public announcement of the delisting offer, and the floor price calculation now includes, among other parameters, an adjusted book value certified by an independent registered valuer.

Discovering the price. The workbook is explicit about the rule: the final offer price shall be determined at the price at which the maximum number of equity shares is tendered by the public shareholders.

The acquirer is not trapped by it. Acquirers and promoters shall not be bound to accept the price determined by the reverse book building process, and the promoter may decide not to accept it. A delisting can simply be abandoned at that point.

The counter-offer. The acquirer may make a counter-offer if its post-offer shareholding at the RBB price is 75% of the company's issued share capital, provided that at least 50% of the public shareholding has been tendered in the RBB process. The counter-offer price shall be not less than the higher of the volume weighted average price of the shares tendered or offered during the RBB process and the indicative price, if any, the acquirer offered upfront.

The fixed-price alternative. Instead of reverse book building, the acquirer may specify a fixed price, which shall be at a minimum 15% premium over the floor price determined under the Delisting Regulations.

When it has worked. The delisting is successful if the shares tendered by public shareholders result in the acquirer's post-offer shareholding being at least 90% of the issued share capital. (The workbook also states the issue is considered successful if promoter holding reaches more than 90%.) On successful completion and payment, and return of shares against invalid applications, the exchange delists the shares.

Afterwards. The acquirers or promoters must continue to give a post-delisting exit offer for a period of one year, and the escrow account must continue to be maintained till the end of that period.

The PSU carve-out. Under the SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2025, public sector undertakings in which the promoter and promoter group together with other PSUs hold 90% or more of the total issued share capital may use a fixed-price route, discontinuing reverse book building, at a price at least 15% above the determined floor price.

A listed engineering company has 10 crore equity shares in issue. The promoter holds 6.5 crore (65%); the public holds 3.5 crore (35%). The promoter announces a voluntary delisting with a floor price of Rs 240.

The reverse book closes with these tenders:

Discovered price = Rs 280, the price at which the maximum number of shares was tendered.

Shares acquired at or below Rs 280 = 0.40 + 0.55 + 1.65 = 2.60 crore
Promoter post-offer holding         = 6.5 + 2.6 = 9.10 crore
                                    = 91.0% of 10 crore   ✓ ≥ 90%
Cash required                       = 2.60 crore × Rs 280 = Rs 728 crore

The delisting succeeds. Three cross-checks worth running:

• The fixed-price alternative would have been at least Rs 240 × 1.15 = Rs 276 — barely below the discovered Rs 280, and it would have bought certainty. On 2.60 crore shares the Rs 4 difference is Rs 10.4 crore.
• The counter-offer gate. Public shareholding is 3.5 crore, so 50% of it is 1.75 crore; 2.90 crore was tendered, so that condition is met. But a counter-offer is available only if post-offer shareholding at the RBB price is 75% — here it is 91%, so the acquirer has no need of one.
• The promoter can still walk. Rs 728 crore is not an obligation. If the board decides Rs 280 is too rich, it simply does not accept the discovered price, and the company stays listed.

Had the maximum tender instead sat at Rs 265, the discovered price would be Rs 265, only 0.95 crore shares would be acquired, and the promoter would reach 7.45 crore = 74.5% — short of 90%, and the delisting would fail.

Chapter 2, in the delisting section of the regulatory framework, carries reverse book building, the counter-offer conditions and the success thresholds. Merchant bankers manage delistings under the Delisting Regulations, which is why the topic sits in this paper at all.

Expect the 90% success threshold, the 15% premium on the fixed-price alternative, the 75% / 50% counter-offer conditions and the one-year post-delisting exit offer as factual questions. Expect also the conceptual one: who determines the price in an RBB (the public shareholders) and whether the acquirer must accept it (no).

• The price is the one at which the maximum number of shares is tendered — that is the workbook's formulation. It is not the highest price bid and not the volume weighted average.
• The acquirer is never bound to accept the discovered price. A delisting that discovers an unacceptable price is abandoned, not completed at a lower number.
• 90% is the acquirer's post-offer shareholding of the issued share capital, not 90% of the public shareholding tendered.
• The counter-offer has two conditions, not one — post-offer shareholding of 75% and at least 50% of the public shareholding tendered.
• The 15% premium attaches to the fixed-price route, both for ordinary acquirers as an alternative to RBB and for eligible PSUs, which do not use RBB at all.
• The exit offer and the escrow run for a year afterwards. Delisting is not the end of the obligation.
• Do not confuse this with book building in an IPO, where the issuer sells and the discovered price is what investors will pay. Here the acquirer buys.