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Govt plans to delist state-owned telco MTNL

The government is planning to delist telecommunications company (Mahanagar Telephone Nigam Limited) MTNL, sources told CNBC Awaaz on February 15. Following the news, the telco’s stock gained more than six percent.

It must be noted that MTNL, wholly owned subsidiary of Bharat Sanchar Nigam Limited (BSNL), has been running into losses for a long time. Also, recently an Inter Ministerial Group gave a green signal to sell the properties of BSNL and MTNL worth Rs 3000 crore.

CNBC-TV18 had in January reported that government will soon invite bids for sale of properties belonging to BSNL and MTNL on the basis of a new valuation formula.

The decision to sell the properties of these state-owned telecommunications companies is part of the government’s ongoing efforts to raise funds through disinvestment. The properties in question are located in Delhi, Hyderabad, and Lucknow. The Disinvestment Department will soon start inviting bids for the properties.

When and why will MTNL be delisted?
According to sources cited by CNBC Awaaz, the government will start the process of delisting MTNL in the new financial year. They said the government has completed the legal proceedings for the delisting process. Before its delisting, the approval of the Group of Ministers will also have to be taken. Sources said the government wants to merge BSNL and MTNL but due to the listing of MTNL the merger has not been able to go through.

What does share delisting mean?
The process of removing the shares of a company from the exchanges is called delisting. This means, after delisting, no trading of the firm’s shares can take place on the stock exchange. Delisting takes place either at the will of the company’s management or in case of violation of rules.

Delisting rules
The company whose shares are to be delisted fixes the floor price for delisting. Floor price is the minimum amount at which the shares are bought back. After the floor price is set, the reverse book building process begins. Reverse book building is the price at which the investor wants to sell the shares of the company. The average price of reverse book building becomes the delisting price.

Why do companies delist
If the management of a company feels that the valuation of the stock is not right, it may decide to delist. It can also be done following a regulatory ban due to violation of norms. CNBCTV18

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