India’s securities regulator, the Securities and Exchange Board of India (SEBI), is planning significant reforms to its merger and acquisition rules, including barring acquiring companies from offering higher prices or additional compensation to major shareholders, according to two sources familiar with the matter who spoke to Reuters. The proposed changes aim to level the playing field for smaller and retail investors while expediting deal completion.
SEBI Chairman Tuhin Kanta Pandey confirmed on Wednesday that the regulator is working to revamp the so-called “takeover code” regulations and that proposed amendments will be shared for public feedback. He did not provide specific details. SEBI did not immediately respond to Reuters’ request for comment on the scope of the reforms.
Among the planned changes, acquirers would be prohibited from negotiating private deals with large shareholders for six months after making an open offer to acquire shares from the public. SEBI also intends to shorten the timeframe for completing an open offer to 30 days from the current 60, with faster mechanisms for regulatory approvals. Mandatory external valuations would be required when major shareholders sell stakes privately to select parties, addressing past cases where preferential treatment for large investors raised concerns.
The proposed reforms follow a surge in mergers and acquisitions in India, supported by a Reserve Bank of India decision allowing domestic banks to finance deals and growing foreign investment in Indian businesses. Observers note that previous transactions, such as the Adani Group’s acquisition of a 27.26% stake in New Delhi TV Ltd in 2022, highlighted regulatory gaps that allowed founders or large shareholders to receive premiums above open-offer prices for minority investors.
SEBI is also reviewing rules on “creeping acquisitions,” which currently permit existing investors in listed companies to raise their stakes by up to 5% annually without triggering a mandatory open offer. Sources told Reuters that the regulator is considering stricter thresholds in line with global standards, such as Singapore’s 1% every six months or Hong Kong’s 2% annually. In India, an open offer is triggered when an acquirer crosses 25% of voting rights, compared with 30% in the UK.
The regulator’s overhaul of takeover and acquisition rules is seen as part of a broader effort to enhance transparency, protect minority shareholders, and modernize India’s corporate governance framework amid increasing domestic and international deal activity.
