When Boardrooms Become Battlefields: Untold Story of Hostile Takeovers in India

The recent acquisition of NDTV media by Adani Enterprise have reignited debates on the growing phenomenon of corporate takeovers, while this development has significantly drawn attention but it is not the first instance of hostile takeover in the Indian market, the earliest recorded instance was made in the year 1983 where Swaraj Paul and London based industrialist made an attempt to acquire Delhi cloth mills ltd and escorts ltd by hostile means. However later in the year 1998 India cements successfully acquired Raasi Cements, a significant and aggressive acquisition in the Indian corporate market.

The term “Hostile Takeover” had come into prominence when Elon Musk, owner of Tesla and SpaceX acquired Twitter renaming it to “X” through bear hug strategy, a method where an acquirer makes an unsolicited offer to purchase a target company’s offer at a substantial premium over market prices. Traditionally in the Indian market, the corporate structure used to follow the promoter centric approach where 78% of the company was used to be run by family members but over the time the promoter centric structure in India began to evolve giving way to increasing instances of mergers and acquisition, this transformation gradually laid the foundation for the concept of hostile takeover- an acquisition strategy often perceived as aggressive and sometimes unfair for its method.

 DECODING THE CONCEPT OF HOSTILE TAKEOVERS

A hostile takeover is a bid to acquire the tender company where board of directors are not well versed with the receptive of the offer. This type of takeover often referred as aggressive acquisition where the consent of the post bearers does not take into consideration and considered as a nuclear threat to corporate governance, the most dramatic of all corporate devices.  However, the term takeover itself derived its origin from corporate takeover which considered as an umbrella term signifying a transaction where the acquirer obtains a controlling stake in the target company.

Takeovers are generally of two types- friendly takeover and hostile however the difference is solely in the manner which the company acquires.  A friendly takeover is a type of acquisition where the obtaining shares from the target company took place with the consultation and prior imitation with regard to the board of directors giving them both reasonable time and course of action. On the other hand, hostile takeover generally takes no prior approval and it can also diminish the market efficiency by holding underperforming companies accountable and maximizing shareholder through direct offers. Usually, hostile takeover took place after failed friendly negotiation, this type of acquisition also restrict room for negotiation as the outcome is pre-decided beforehand. The commonly recognized forms of hostile takeovers include strategies such as the bear hug where open letter is provided to target company’s CEO & Board of Directors, tender offer, proxy contest, and creeping acquisition.

One of the first theorized market control concept was paved by Henry M, however it was Louis. E. Wolfser who put the concept of hostile takeover first, subsequently regarded as the inventor of corporate raider through tender offers and founder of first modern conglomerate. Hostile takeovers have varied in scale across jurisdiction but the AOL’s takeover still remains one of the biggest acquisitions where AOL took over Time Warner with a staggering deal price of $164bn in the year 2000, while Indian corporate market has only one successful takeover where Raasi Cements was acquired by India Cements in 1998 as the afterwards acquisition only made an attempt to acquire.

INDIAN MARKET REALITIES

Unlike the United Kingdom and the United States, the Indian corporate environment has witnessed relatively few hostile takeovers, largely because of promoter dominance, institutional safeguards, cultural resistance and government policies during pre-liberalisation. As hostile takeover is a rare phenomenon in the Indian landscape, but this doesn’t negate the possibilities which India possess as the current corporate market possess such risks due to increasing corporate entities both domestic and international, many of them establishing or expanding their presence in the Indian market with a growing influence of western corporate structure.

Recently when Minda Corporation, a leading giant in automobile manufacturing acquired a huge 15.7% stake in Pricol Limited, this surprisingly became the subject of intense discourse in the Indian corporate market. Though this is not the first time an Indian company tried to take over the company through hostile means, the concept of hostile takeover draws its origin way back to the year 1983 when Swaraj Paul made an aggressive move to acquire Delhi Cloth Mills owned by Shri Ram Family and Escorts Limited under the ownership of Nanda Family. This incident not only sparked debates pertaining to Hostile acquisitions but also shed a light on the huge gap in the corporate regulatory framework pertaining to regulate this type of acquisitions in the Indian market as India during pre-liberalisation was still establishing its footing in the corporate sector.

After this Development SEBI (Securities Exchange Board of India) established in the year 1988 as a non-statutory body enacted Code on Takeovers (Substantial Acquisition of Share and takeover) Regulation which later on revised in the year 2011 when SEBI Takeover came out, accompanying with certain additions with a sole objective to regulate the mergers and acquisitions in the Indian market.

Section 2(b) of SEBI takeover code defines acquisition, directly or indirectly acquiring or agreeing to acquire the respective shares or voting rights in or control over a target company, clearly outlining the definition with taking purview of both direct and indirect means of acquisitions not being restrictive or limited in the nature of acquisition. Whereas section 2(z) defines the target company which includes both corporate and corporation limited under a control legislation under state or provincial authority whose shares are listed on stock exchange, a restrictive interpretation. while Regulation 3 ostensibly addresses acquisitions, in practice it has been reduced to little more than a disclosure requirement. Though these terms have been defined in the code yet the drafters miss the forest for the trees as they have neither defined hostile takeover nor made any rules regarding the regulation of the same even after revision, which clearly picturise the corporate landscape Indian possess as it’s still a nascent to the concept.

The current regulation and statue don’t address hostile takeovers and the challenges posed by them if takes places which clearly put India at a risk to submerge in the corporate veil as the influence pertaining to this concept has been rapidly growing in the current corporate governance.  This can be seen through various examples and attempts though largely failed and only few of them secured to acquire through hostile means. India as of now has saw only 3 successful hostile takeovers with first carried out by Indian Cements who acquired Raasi Cements in the year 1998, later in the year 2022 nearly after two decades another successful acquisition took place when L&T acquired 60% shares in Mindtree which triggered the revival of hostile takeover in the Indian market. The acquisition of NDTV by the Adani Group followed soon after its takeover of Mindtree, suggesting that the latter deal paved the way for the former while being a 3^rd successful takeover in the Indian acquisition market.

Nevertheless, it would be misleading to conclude that India has been entirely insulated from hostile takeovers. Currently SEBI drawing its regulations from Delaware States’s regulation famous for its effective framework to tackle hostile takeovers, to develop regulatory framework to tackle the growing influx. The Indian corporation while being at a risk of acquisitions through hostile means takes certain defences to avoid the stipulated manner of acquisitions such as Poison pill, white knight and shark repellents etc. The recent case where one of the defences white knights was applied, when GESCO to prevent itself from getting acquired by Renaissance Real Estate via aggressive acquisitions offered Mahindra and Mahindra to seek a friendly acquisition.

THE STAKEHOLDER DILEMMA: BALANCING INTERESTS IN HOSTILE TAKEOVERS

Hostile takeovers bring two-sided issue, that is, have a different effect on different stakeholders. To shareholders, this has an immediate financial appeal. Empirical evidence shows that the shareholders of target companies usually realize a lot of positive abnormal returns when a hostile bid is announced, indicating that value is created in form of acquisition premiums. Nonetheless, this advantage can be offset by the fact that such takeovers are coercive and shareholders may feel forced to sell which can destroy their long-term investment plans. Challenges differ between the management and employees.

Although hostile takeovers have the potential to bring about functional economies and organizational refocusing, the cost involved is usually at the expense of job security and organizational stability. Studies note that the risk of hostile takeovers can erode managerial job security, which results in short-term decision-making and low levels of investment in innovation. It is possible that the employees can feel more anxiety and lower morale since the company that acquires the other one tends to optimize work, which can lead to layoffs. At a macro level, hostile takeover can affect the market forces. Although they can spur competition and force underperforming companies to do better, they can also lead to the killing of innovation. There is an indication that the threat of being taken over can make firms decrease their expenditure on research and development as it is accompanied by uncertainty and pressure of such takeovers.

These world processes collide with the local specifics of the Indian context. The Indian takeover environment may be complicated by the promoter-oriented character of most companies. Regulatory frameworks such as the SEBI Takeover Code are intended to bring structure but the ingrained interests of promoters tend to affect the efficacy of the regulations and thus the Indian corporate governance ecosystem is unique.

THE ROAD AHEAD: EVOLVING DYNAMICS IN HOSTILE TAKEOVERS

The landscape of hostile takeovers is undergoing significant transformation, influenced by global trends and India’s unique market characteristics. Globally, shareholder activism has surged, with a 47% increase in activist campaigns in 2024, reflecting a growing demand for accountability and strategic alignment in corporate governance. Concurrently, Environmental, Social, and Governance (ESG) pressures are intensifying, compelling companies to adopt sustainable practices to meet investor expectations and regulatory requirements. Private equity (PE) investments are also on the rise, with India witnessing a rebound in PE and venture capital investments, increasing by approximately 9% year-over-year to reach around $43 billion in 2024.

In India, these global trends intersect with domestic developments. Promoter shareholding in listed companies has declined to its lowest level in eight years, falling to 39.6% in early 2025, indicating a shift towards more diversified ownership structures. Simultaneously, institutional investors are gaining prominence, with foreign institutional investors contributing 63% of the record $8.9 billion in institutional investments in Indian real estate in 2024. This influx of institutional capital is reshaping the corporate governance landscape, potentially paving the way for more active engagement in corporate affairs. Despite these advancements, the question remains: Will India witness a genuine rise in hostile takeovers, or will the regulatory framework continue to serve as a nominal deterrent? The evolving dynamics suggest that while the structural foundation for increased hostile takeover activity is being laid, the pace and extent of such developments will depend on the interplay between regulatory reforms, shareholder activism, and the strategic interests of institutional investors.

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