Market regulator Securities and Exchange Board of India (SEBI) and stock exchanges are working on a plan to identify and delist inactive listed companies that have little or no significant business operations, as the market regulator looks to protect investors from entities that may be misused for fraudulent activities.
According to people familiar with the discussions, stock exchanges are examining multiple parameters to identify such companies. These include market capitalisation of less than Rs 10 crore, profitability over the years, Net worth, shareholding and significant movements in share prices over a short period.
The parameters are currently under discussion and are aimed at identifying companies that remain listed despite having limited or no meaningful business operations.
Once a preliminary list is prepared based on the parameters, exchanges are expected to conduct physical verification of the companies. This would include visits to their registered offices and business locations to establish whether they have genuine business operations or exist largely on paper, sources said.
Companies that cannot be traced at their registered addresses and meet the other identification parameters could be issued notices by the exchanges, asking them to explain why they should continue to remain listed.