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Sources said the Sebi committee was  comprehensively reviewing open offers and may raise the open offer trigger to 25 per cent from 15 per cent now — the reason being that 26 per cent shareholding in India gives acquirers the power to block special resolutions for important decisions during shareholder meetings.

Experts said the move would benefit private equity funds that look for a significant stake without having to trigger the open offer.

The move will align Indian regulations to global best practices. In the UK and the rest of Europe, the open offer trigger is set at 30 per cent. In the US, there is no mandatory trigger for an open offer.

The change in open offer trigger will also mean that Sebi will have to revise the size of open offers. Under current regulations, any entity that triggers an open offer has to make an offer for a further 20 per cent shares in that company.

People close to the development indicated that Sebi might ask the acquirer to make an offer for the total outstanding shares in that company, as they do in Europe.

This, again, would mean tweaking the delisting guidelines, which stipulate that shares to be acquired should result in the post-offer shareholding of the promoters reaching the higher of 90 per cent of the total issued shares of the class (excluding the shares already held by a custodian and against which depository receipts have been issued overseas) and the aggregate percentage of pre-offer promoter’s shareholding and 50 per cent of the offer size.

“Either Sebi will need to integrate the open-offer trigger with delisting guidelines or alternatively, the acquirer may be required to bring back the public float to the minimum required levels of listing within a stipulated time frame,” said Siddharth Shah, Partner at legal firm Nishith Desai Associates.


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May 2024