Author: Ajim B Shaikh

Introduction

When it comes to the public companies of India, the Securities and Exchange Board (SEBI) is the key authority for monitoring any acquisitions or takeovers. Its job is to foster a well-ordered securities market and keep things transparent, all while making sure minority shareholders are protected from hostile moves as corporations grow through M&A.

At the heart of SEBI’s oversight is the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Known in the industry as the SAST Regulations or simply the Takeover Code, this is the primary tool we have for governing the acquisition of listed firms. It replaced the old 1997 Code and is the bedrock of our regulatory framework for such deals. The 2011 version was put in place with some significant improvements over what came before, following recommendations from C. Achuthan’s Takeover Regulations Advisory Committee (TRAC). A comprehensive revision of these rules was made most recently on December 5, 2025.

Do note that these regulations only apply to target companies whose equity is on an Indian stock exchange; if the company is unlisted, you are under the purview of the Companies Act, 2013. In carrying out its duties, SEBI works in concert with a number of other statutes: the LODR for disclosures, the PIT Regulations to curb insider trading, and the Competition Act where CCI approval is needed for mergers, among others.

Legal Framework

• SEBI Act, 1992: The Securities and Exchange Board of India (SEBI) gets its power to regulate takeovers from Section 11(1)(h) of the SEBI Act, 1992. This section allows it to manage significant acquisitions of shares and company takeovers. Sections 11B to 11E give SEBI wide enforcement and investigative powers. These include the ability to conduct inquiries, inspect books and records, issue directives, and take action against violations of takeover rules. Section 15H sets penalties for not following takeover obligations, such as failing to disclose changes in shareholding or not making a required open offer. Thus, SEBI creates legal measures to safeguard takeovers and acquisitions.

• Takeover Regulations (SEBI SAST Regulations, 2011): The main framework that governs acquisitions and takeovers is found in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. These regulations clarify essential terms such as “acquirer,” “control,” “target company,” and “open offer,” and outline the responsibilities of acquirers. Regulation 3 requires a mandatory open offer when acquisition thresholds are exceeded. Regulation 3(2) covers creeping acquisitions by current shareholders. Regulation 4 addresses acquiring “control” over a listed company, regardless of the shareholding percentage. Regulation 10 offers exemptions in certain situations, while Regulations 16 to 19 manage the public announcement and offer process. SEBI routinely updates these regulations and issues FAQs, circulars and master circulars, FAQs. Additionally, the regulations detail pricing mechanisms, disclosure obligations, exemptions, timelines for procedures, and formalities for offers.

• Companies Act, 2013: The Companies Act, 2013 is very much aligned to takeover regulations in India. Section 230 addresses compromises, arrangements and mergers that have been authorized by the National Company Law Tribunal (“NCLT”). Any acquisition made in accordance with a compromise or arrangement scheme approved by the NCLT will not be subject to open-offer obligations under the Takeover Regulations. As well, sections 42 and 62 address the rules on private placements and additional issues of share capital. These could affect the shareholding structure of a target entity and therefore increase the likelihood that a takeover threshold would be met. Under sections 89 and 90, the beneficial ownership of a target entity must be disclosed and when that beneficial ownership exceeds 10% then that entity is considered “significant beneficial owner” so that there is transparency around who owns the shares of a target entity. As noted above, in order to ensure compliance with SEBI regulations, acquirers must also meet all other relevant requirements of the Companies Act with respect to Board Approvals, Shareholder Approvals, Filings and Statutory Disclosures etc.

• Other Overlapping Regulatory Regimes: Takeovers in India are also regulated by a number of other regulatory bodies. Therefore, large M&A deals will need to obtain approval from the Competition Commission of India (“CCI”) under the Competition Act, 2002 before completion if those deals constitute “combinations” within the meaning of sections 5 & 6 of the said Act. Furthermore, acquisitions of Banks and Financial Institutions (“BFIs”) will need approval from the Reserve Bank of India. Similarly, cross border acquisitions will need to comply with India’s FDI Policy and FEMA Regulations. Finally, Listed entities are also subject to various disclosure obligations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) including certain disclosure obligations in relation to acquisitions/disposals and changes in shareholding pattern.

Key Mechanisms of SEBI’s Takeover Code

Trigger Thresholds: According to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, a mandatory open offer is required when an acquirer, along with persons acting in concert (PACs), acquires 25% or more of the voting rights in a listed company under Regulation 3(1). If an acquirer holds less than 25% and then buys more to cross this threshold, they must make a public open offer to the target company’s shareholders. Additionally, if an acquirer already has 25% or more but less than the maximum allowed non-public shareholding, they can acquire up to 5% more voting rights in a financial year without having to make another open offer under Regulation 3(2). Gaining “control” over a listed company independently requires an open offer, even if the 25% threshold is not met, according to Regulation 4. These rules aim to protect public shareholders by ensuring transparency and giving them an exit option during major acquisitions or changes in control.

Creeping Acquisitions: The Takeover Regulations allow for a gradual accumulation of shareholding via creeping acquisition. If an acquirer and its Person Acting in Concert (PACs) collectively own at least 25% but less than 75% of the voting rights in a publicly traded company, they are permitted to acquire an additional 5% voting rights within a fiscal year without the need for a new open offer. Any acquisition that exceeds this threshold necessitates a mandatory open offer in accordance with Regulation 3(2), thereby preventing sudden or excessive control concentration and ensuring that minority shareholders have an exit opportunity.

Mandatory Open Offers: Mandatory Open Offers are triggered when an acquirer crosses the 25% threshold or acquires control over a listed company. The process begins with a public announcement, followed by filing a draft Letter of Offer with SEBI. The open offer allows public shareholders to tender their shares at a fair price. Under Regulation 8 of the SAST Regulations, the offer price is determined according to prescribed pricing mechanisms. SEBI also monitors the process to ensure compliance.

Exemptions and Special Cases: Certain purchases may be exempt from the required open offer mandates as outlined in Regulation 10. Transactions carried out under schemes of arrangement or mergers that receive approval under Section 230 of the Companies Act, 2013 could be eligible, as these transactions are reviewed by the NCLT. Other exempt cases include some rights issues, bonus issues, inter-se promoter transfers, and acquisitions made under approved insolvency resolution plans under the Insolvency and Bankruptcy Code, Act 2016 ,(S.31). SEBI may also grant exemptions in special situations where investor interests are not harmed(under reg.11).

Disclosure and Filing Requirements: The Takeover Regulations impose disclosure obligations on acquirers and target companies to ensure market transparency. Both disclose relevant information to SEBI, stock exchanges, and the company itself within the prescribed time limits. The time limit is 2 working days under SAST (Reg.29. Additional disclosures are required after the open offer is completed. These rules work alongside the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.(Reg.30)

Timelines (Open Offer Process): Under SEBI’s SAST Regulations, the process is strictly time-bound. On the trigger date (T), the acquirer makes a Public Announcement (PA). A Detailed Public Statement (DPS) follows within 5 working days. The Draft Letter of Offer is filed with SEBI within 5 working days of the DPS. After SEBI’s observations, the final Letter of Offer is dispatched. The tendering period typically opens later and runs for 10 working days. Payment to shareholders whose shares are accepted must be made within 10 working days after the tendering period closes. The entire process from PA to payment usually takes around 55–60 working days. Strict adherence is mandatory; delays can invite SEBI scrutiny.

Pricing and Fairness Mechanism: Regulation 8 outlines the approach for calculating the minimum open offer price by taking into account the highest price paid by the acquirer, trends in market prices, and additional regulatory factors. These measures guarantee that shareholders have a reasonable chance to exit.

Enforcement Powers and Penalties: Enforcement Powers and Penalties: SEBI enforces the Takeover Code using its powers under the SEBI Act. These powers include Sections 11B to 11E. They allow SEBI to conduct inquiries give directions and take actions to fix problems. For violations such as failure to make disclosures, public announcements, or open offers, or failure to pay shareholders, Section 15H prescribes a penalty of not less than ₹10 lakh, which may extend up to ₹25 crore or three times the profit made from the violation, whichever is higher. In addition, SEBI can order disgorgement of gains, stopping people from being, in the securities market, * making the acquirer pay interest for delays, Violations are adjudicated by an Adjudicating Officer or SEBI’s Whole Time Member, with appeals lying before the Securities Appellate Tribunal (SAT) Orders passed by SEBI or its Adjudicating Officers may be challenged before the Securities Appellate Tribunal (SAT). Further appeals from SAT decisions may be made before the Supreme Court of India on questions of law.

Investor-Protection Objectives: Overall, SEBI’s takeover regulations aim to protect public minority shareholders during corporate control changes. Its primary objectives include of guaranteeing that shareholders obtain timely information regarding takeover transactions, and offering them a fair chance to exit. By requiring a formal open offer whenever control crosses a significant threshold, These objectives also dovetail with related policies: for example, shareholding disclosures (under LODR) ensure that investors always know who their company’s key owners are. The SEBI Takeover Code tries to balance the acquirer’s right to grow/control a business with the right of public shareholders to make an informed decision about tendering their shares.

Interplay with Stock Exchanges and Other Regulators: Stock exchanges like BSE and NSE are right at the center when it comes to takeover deals involving listed companies. They keep things transparent and make sure everyone sticks to the rules. Anytime there’s a public announcement about an open offer or a new acquisition, it goes out through the stock exchange’s platform following SEBI’s guidelines. The exchanges watch trading closely, check disclosures, and enforce listing requirements. The LODR Regulations from 2015 push companies to immediately share news about major acquisitions or disposals with the exchanges. This keeps investors in the loop and helps SEBI keep an eye on takeover activities. The Insolvency and Bankruptcy Code, or IBC, plays a crucial role in insolvency matters. It’s getting more important all the time, especially when it comes to insolvency resolution transactions. The Takeover Code and the IBC are linked. The Takeover Regulations say you don’t need to make a mandatory open offer if you’re buying a company as part of a resolution plan approved by the NCLT under the IBC. This helps companies get rescued and restructured faster. But sometimes, during insolvency proceedings, things get complicated. You might have temporary acquisition or holding arrangements that need clarification or exemption from SEBI. It all depends on the specifics of the case.

• FDI and RBI Regulations Cross-border acquisitions involving foreign investors must additionally comply with India’s Foreign Direct Investment (FDI) policy, FEMA regulations, and sector-specific approval requirements. Acquisitions involving banks and financial institutions may also require RBI approval,

Practical Compliance Steps for Acquirers

Board Approval: It is necessary to take approvals of all board members,directors,and committees for the transactions.If the company is a listed company then it comply with companies act and LODR Regulations.

Identify Trigger Event: The acquirer, along with Persons Acting in Concert (PACs), must continuously monitor the prescribed threshold limits. If the shareholding crosses 25% voting rights in a listed company, a mandatory open offer is triggered. Regulations 3 and 4 of the SEBI SAST Regulations, 2011 govern these trigger events.

Public Announcement (PA): Upon triggering an open offer obligation, the acquirer must make a public announcement. The announcement must be filed with the stock exchanges and SEBI, and simultaneously sent to the target company. acquirer’s identity, details of the acquisition, intention to make an open offer, and other material information as per the Regulations 29 SAST must be disclosed.

Detailed Public Statement (DPS): Publish a Detailed Public Statement in newspapers within 5 working days of the Public Announcement, as required under the Regulations(13(4)SAST.

Draft Letter of Offer: File the Draft Letter of Offer with SEBI through the Merchant Banker within 5 working days from the date of publication of the Detailed Public Statement. The draft must contain all material disclosures, including offer price justification, financial arrangements, background of the acquirer, and risk factors.

SEBI Observations & Revisions: Give due attention to any query observations made by SEBI regarding the Draft Letter of Offer (usually done under 15 days) . Make the necessary changes and get SEBI’s affirmation .

Dispatch of Letter of Offer & Opening of Offer: After receiving SEBI’s observations, dispatch the final Letter of Offer to the public shareholders. The tendering period typically opens after the dispatch and pre-offer advertisement, and remains open for 10 working days.

Compliance During the Offer Period: During the offer period, the acquirer must comply with all SEBI Regulations and disclose any material changes, delays, or revisions to SEBI and the stock exchanges.

Post-Offer Compliance & Payment: Within 10 working days from the closure of the tendering period, payment must be made to the shareholders whose shares are accepted. A post-offer advertisement must also be published within 5 working days after completion of payment, and the final report must be filed with SEBI and the stock exchanges.

Parallel Regulatory & Ancillary Compliances: Along with SEBI compliance, the acquirer must obtain approvals from authorities such as CCI, RBI, and other sectoral regulators. Compliance with LODR Regulations, FEMA/FDI rules, tax laws, KYC norms, and other applicable laws must also be ensured throughout the transaction.

Landmark Indian Cases (2018–2025)

In the Adani Group–NDTV (2022); transaction, SEBI primarily acted as the regulatory authority supervising compliance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. After Adani Group acquired VCPL and exercised the convertible warrant rights linked to NDTV’s promoter company, SEBI treated the transaction as an indirect acquisition resulting in acquisition of substantial control over NDTV. Consequently, SEBI required Adani Group to make a mandatory open offer to public shareholders under the Takeover Code. Despite disputes regarding the actual transfer of shares by the Roys and existing SEBI restrictions against them, SEBI proceeded on the basis of the economic substance and control implications of the arrangement rather than waiting for completion of every formal transfer step. SEBI later issued its final observations approving the open offer process in November 2022, allowing the offer to proceed between November 22 and December 5, 2022. SEBI treated Adani Group’s acquisition of VCPL and its contractual rights in NDTV as an indirect acquisition of control under the Takeover Code. Accordingly, SEBI directed Adani Group to make a mandatory open offer to public shareholders and approved the offer process despite disputes regarding the formal transfer of shares.

L&T–Mindtree (2019); marked India’s inaugural hostile acquisition in the IT industry. V.G. Siddhartha, Mindtree’s largest external shareholder and founder of Café Coffee Day, sold his 20.32% stake to engineering giant Larsen & Toubro to address rising debts — without informing or getting approval from the founders. After L&T surpassed the 25% limit, SEBI’s SAST Regulations required a public offer for an extra 31%. Founders fought back with boardroom tactics, yet couldn’t lawfully prevent it. India’s Competition Commission approved L&T to take over up to 66.15%, transferring control to L&T. By November 2022, Mindtree merged with L&T Infotech, resulting in LTIMindtree. The main point: the 25% SEBI threshold is mandatory, even if founders strongly resist the acquisition, indicating that hostile takeovers are completely allowed by Indian law.

The IHH-Fortis Healthcare (2018-2025); case is unique in terms of the complexity of the process. Malaysia-based IHH Healthcare made a preferential allotment of INR 4000 crores to buy 31.17% of Fortis Healthcare from its original owners, who are in crisis, and hence issued a mandatory open offer to buy an additional 26.1%. The original owners of Fortis, the Singh Brothers, had an arbitration award from Japanese pharmaceutical company Daiichi Sankyo for INR 3600 crores and thus gave the company an avenue to challenge the offer by going to the Supreme Court, who upon reviewing that matter placed a stay on the open offer and froze all related actions in late December 2018. After the Supreme Court imprisoned the Singh Brothers for their role in the matter, they re-affirmed the stay on the case and sent the matter to the Delhi High Court to resolve. Consequently, SEBI took 7 years to process and approve IHH’s open offer (in October 2025 from the original agreement date). Therefore, it is important to note that even when at SEBI a transaction is compliant with all related regulations, it can be delayed indefinitely due to unrelated third-party litigation.

Key Provisions under the Original 2011 Regulations and Recent Amendments (2021–2025)

• Trigger Threshold for Open Offer: Originally in SEBI SAST regulations 25% of voting rights for acquisition of control was in present there is no general change but for Companies listed in the Innovators Growth Platform (IGP) threshold has been increased to 49% the reason behind this is to make startup and growth companies raise their capital without triggering Open offer application

Creeping Acquisition Limit; In the creeping Acquisition Limit 5% limit continues in operation the Framework remains the same subject to minimum public share holding and disclosure norms

pricing mechanism has been changed based on negotiated price historical acquisition price and market average it has been redefined by methodologies especially for infrequently traded shares and specialised transactions this aims for the stronger focus on fairness and investor protection in illiquid stock

Disclosure and time requirement the Strict timeline for the announcement of the filing SEBI review and completion remains the same but electronic filing digital complaints system and automatic monitoring has been introduced these ensures efficiency and faster communication

Exemptions (Regulation 10): The Takeover Regulations exempt certain acquisitions from mandatory open-offer obligations, including court-approved schemes of arrangement, inter se promoter transfers, rights issues, and acquisitions made under IBC-approved resolution plans, thereby facilitating smoother corporate restructuring and revival processes.

Challenges, Loopholes, and Reform Suggestions

1. SEBI’s strict takeover timeline are Very difficult to match with complex or multi regulatory transactions And we have seen in NDTV acquisition created certain uncertainty regarding the exact stage where transaction Trigger regulation 3 obligation that Takeover Code observers to note that it is still unclear
2. Certain complex structures such as share swaps, warrants, or preferential allotments may be used to delay or dilute open-offer obligations.
3. Although SEBI imposes heavy penalties for violations, some promoters still attempt to exploit technical loopholes, resulting in long litigation.
4. Critics point out that the creeping acquisition provision of 5% is not adequately safeguarding minority stockholders.
5. Experts feel that the threshold of 25% is fairly high when measured against the standards of some other countries.
6. In practice, open offers may become ineffective if market prices rise significantly above the offer price after announcement of the transaction.

Reform Suggestions

SEBI should move from a “form-based” to a more “substance-based” regulatory approach. current Framework is strong in the paper but not in practical. it should include de facto veto power mechanism in a complex cases(Eg. significant influence over board decisions.). SEBI should consider lowering the creeping acquisition limit from 5% to 3% so that minority shareholders get a fair opportunity to exit even where control is being acquired stealthily through gradual acquisitions. SEBI should keep reviewing the entire Takeover Code every 3–4 years to keep it updated with changing market practices and deal structures.

Conclusion: In general, although there are some practical obstacles or difficulties in interpreting parts of the SEBI Takeover Code, its fundamental purpose as to provide protection of minority shareholders, promote market transparency, and regulate the transfer and change of ownership/control of public corporations in the Indian securities market continues to be significant today. In addition, ongoing reforms and refinements of regulations should continue to strive toward achieving a balance between providing adequate protection for investors while supporting the efficient and commercially viable acquisition of businesses (i.e., providing the necessary conditions for successful commercialization).