Delisted stocks: High-stakes game with insane pay-offs

16 May 2022

On May 9, despite spirited resistance from minority shareholders, the proposal for voluntary delisting of Elcid Investments went through. Elcid Investments is an investing and trading company, majorly owned by the founders of Asian Paints. The delisting marked the end of a long and bitter chapter for retail investors who had held on, hoping for a fair exit.

Delisting can be a scary word for minority shareholders. The moment the word surfaces, many investors panic and exit the stock, accepting whatever offer price is on the table even when they believe the company is worth far more. At Elcid, that frustration ran particularly deep. Minority shareholders argued that the stock was worth nearly 6x the floor price being offered, making the exit feel less like an opportunity and more like a forced compromise.

The fight put up by minority investors was not quiet. Rajan Shah, of 3A Capital Services, is considered one of the biggest names in the delisted shares space in India. Shah held approximately 11 percent in Elcid and mounted a serious challenge approaching courts, writing to the stock exchange, and even escalating the matter to the market regulator. It was a prolonged and exhausting battle, and ultimately, he sold around 9 percent of his holding. Not because he had run out of arguments, but because he had run out of patience.

After the delisting, Shah indicated he may retain a small stake in Elcid. His reasoning was simple. "It is a good company," he said. And if things get difficult down the line, he knows the terrain well enough to navigate it.

The Elcid case is a reminder of how voluntary delistings can leave minority shareholders in a difficult spot legally within bounds, but commercially uncomfortable. For retail investors in similar situations, the lesson is clear: knowing when to fight and when to step back is as important as picking the right stock in the first place.

Rajan Shah, of 3A Capital Services, is considered to be one of the biggest names in the delisted shares space, he ultimately sold 9 percent (approx) of his 11 percent (approx) shareholding, tired of the long and hard fight – going to court, approaching the exchange and even the regulator. After the delisting, Shah may retain a small holding in Elcid. “It is a good company,” he said, and if the going gets tough, he is familiar with the battlefield.