Offer Price & Mode of Payment
Regulation 8. Offer Price
8(1).
When an acquirer makes an open offer under:
Regulation 3,
Regulation 4,
Regulation 5, or
Regulation 6
The price at which the open offer is made cannot be arbitrarily fixed.
It must follow a minimum pricing rule.
The offer price must be at least equal to (not lower than) the price determined under 8(2), or 8(3) (whichever is applicable).
8(2).
An acquirer makes a direct acquisition or a qualifying indirect acquisition (deemed direct under Regulation 5(2)).
In such cases, the offer price must be determined using specific benchmarks.
The final offer price must be the highest among the prescribed factors.
(a). Highest negotiated price:
The price must be at least equal to the highest price per share agreed in any transaction.
This includes any agreement that triggered the open offer obligation.
Example:
Company A (acquirer) enters into an agreement with Promoter P of a target company.
Under this agreement: A agrees to buy 20% shares from P at ₹150 per share.
This transaction triggers an open offer obligation.
Now, A must make an open offer to public shareholders.
Suppose A wants to offer ₹120 per share in the open offer.
This is not allowed.
Since the highest negotiated price = ₹150,
The open offer price must be at least ₹150 or higher.
(b). 52-Week Volume-Weighted Average Price (VWAP)
The acquirer (and persons acting in concert) may have bought shares in the past.
The law looks at all such acquisitions made in the 52 weeks before the public announcement (PA).
It calculates the volume-weighted average price (VWAP) of those purchases.
This VWAP reflects the average price paid, adjusted for quantity of shares bought.
The open offer price must be at least equal to this VWAP.
Example:
Over the last 52 weeks, the acquirer and PACs made the following purchases:
Bought 1,000 shares at ₹100
Bought 2,000 shares at ₹120
Bought 3,000 shares at ₹140
Total shares bought = 6,000 shares
Total value = (1,000 × 100) + (2,000 × 120) + (3,000 × 140) = 100,000 + 240,000 + 420,000 = ₹7,60,000
VWAP = ₹7,60,000 ÷ 6,000 = ₹126.67 per share
Therefore, the open offer price must be at least ₹126.67 or higher.
(c). Highest Price in Last 26 Weeks
The acquirer and persons acting in concert (PACs) may have purchased shares in the recent past.
The law looks specifically at acquisitions made in the 26 weeks before the public announcement (PA).
Among all such transactions, the highest price paid (or payable) is identified.
The open offer price must be at least equal to this highest price.
Example:
In the last 26 weeks, the acquirer made the following purchases:
Bought shares at ₹110
Bought shares at ₹125
Bought shares at ₹140
The highest price paid = ₹140
Therefore, the open offer price must be at least ₹140 or higher.
(d). 60-Day Market Price (VWAP) – Frequently Traded Shares
The shares of the target company must be frequently traded.
The law looks at the market price over the last 60 trading days before the public announcement (PA).
It calculates the volume-weighted average market price (VWAP) during this period.
The price must be taken from the stock exchange where the highest trading volume occurred.
This VWAP reflects the true market price based on actual trading activity.
The open offer price must be at least equal to this VWAP.
Example:
Shares of the target company are actively traded on NSE and BSE.
Over the last 60 trading days: Maximum trading volume is on NSE
On NSE, the 60-day VWAP = ₹135 per share
Therefore, the open offer price must be at least ₹135 or higher
Exception for PSU Disinvestment
Normally, the 60-day VWAP (clause d) is used to determine the open offer price.
However, an exception is provided in certain cases.
This exception applies when there is a disinvestment of a Public Sector Undertaking (PSU).
The disinvestment must be carried out by:
The Central Government, or
A State Government
In such cases, the 60-day VWAP rule does not apply.
However, this exception is not automatic in all PSU cases.
It applies only when there is a change in control of the PSU.
(e). Valuation for Infrequently Traded Shares
When the shares of the target company are not frequently traded:
In such cases, market price cannot be reliably used.
Therefore, the price is determined by an independent registered valuer.
The valuer uses recognized valuation methods.
These include factors such as:
Book value of the company
Comparable trading multiples (e.g., similar companies)
Other customary valuation parameters
The final price is based on a fair and reasoned valuation rather than market data.
Completion of Ongoing Valuation (Transitional Provision)
When an valuation assignment is already ongoing then:
This assignment must have been started before the 2025 Amendment Regulations came into force.
The acquirer and the manager to the open offer must continue with this existing valuation.
They are not required to restart the valuation under new rules.
However, there is a time limit for completion.
The valuation must be completed within 9 months from the date the amendment regulations come into force.
(f). Per Share Value under 8(5)
In certain cases, 8(5) becomes applicable.
Under such cases, a per share value is specifically computed.
This value is based on the method prescribed in 8(5).
The computed per share value must be considered while determining the offer price.
If applicable, the offer price must be at least equal to this computed value.
8(3).
Offer Price in Indirect Acquisition (Non-Deemed Direct Case)
Suppose , an acquirer makes an indirect acquisition of shares, voting rights, or control but:
The acquisition does not satisfy the conditions under Regulation 5(2) (i.e., not treated as a deemed direct acquisition).
Even in such cases, an open offer is still required.
The offer price must be determined using specific benchmarks.
(a). Highest negotiated price:
If there is any agreement involving shares of the target company,
The highest price per share agreed in such transaction must be identified.
The open offer price must be at least equal to this highest negotiated price.
Example:
Company X acquires Company Y (indirect acquisition).
Company Y holds 30% shares in Target Company (T).
This acquisition triggers an open offer, but it is not a deemed direct acquisition under Regulation 5(2).
As part of the same transaction:
X also enters into a separate agreement to buy 5% shares of T directly from a shareholder
The agreed price is ₹180 per share
Now, while determining the open offer price
The highest negotiated price = ₹180
Therefore, the open offer price must be at least ₹180 or higher.
(b). 52-Week VWAP (Indirect Acquisition – Relevant Date)
The acquirer and persons acting in concert (PACs) may have acquired shares in the past.
The law considers acquisitions made in the 52 weeks before a specific cut-off date.
The cut-off date is the earlier of:
The date when the primary acquisition is contracted, or
The date when the intention/decision to acquire is publicly announced
The volume-weighted average price (VWAP) of these past acquisitions is calculated.
The open offer price must be at least equal to this VWAP.
Example:
Company X plans to acquire Company Y (indirect acquisition of Target Company T).
Relevant dates:
Intention announced: 1 March
Agreement signed: 15 March
Earlier date = 1 March
So, the 52 weeks before 1 March are considered.
During this period, X and PACs bought shares of T:
1,000 shares at ₹100
2,000 shares at ₹12
3,000 shares at ₹14
Total shares = 6,000
Total value = ₹7,60,000
VWAP = ₹7,60,000 ÷ 6,000 = ₹126.67
(c). Highest Price in Last 26 Weeks (Indirect Acquisition)
The acquirer and persons acting in concert (PACs) may have acquired shares in the recent past.
The law looks at acquisitions made in the 26 weeks before a specific cut-off date.
The cut-off date is the earlier of:
The date when the primary acquisition is contracted, or
The date when the intention/decision is publicly announced
Among all such transactions, the highest price paid (or payable) is identified.
The open offer price must be at least equal to this highest price.
Example:
Company X plans an indirect acquisition of Target Company T.
Relevant dates:
Intention announced: 1 April
Agreement signed: 20 April
Earlier date = 1 April
So, the 26 weeks before 1 April are considered.
During this period, X and PACs bought shares of T at ₹115 , at ₹130 and at ₹150
The highest price paid = ₹150
Therefore, the open offer price must be at least ₹150 or higher.
(d). Highest Price Between Trigger Date and Open Offer (Indirect Acquisition)
The acquirer and persons acting in concert (PACs) may continue acquiring shares after the trigger event.
The law identifies a specific time window:
Starting from the earlier of:
Date of primary acquisition agreement, or
Date of public announcement of intention,
Up to the date of the public announcement (PA) of the open offer
During this period, all acquisitions are examined.
The highest price paid (or payable) in this period is identified.
The open offer price must be at least equal to this highest price.
Example:
Company X plans an indirect acquisition of Target Company T.
Relevant dates:
Intention announced: 1 May
Agreement signed: 10 May
Earlier date = 1 May
Open offer public announcement (PA): 1 July
So, the relevant period = 1 May to 1 July
During this period, X and PACs bought shares of at ₹140 , ₹155 , ₹170.
The highest price paid = ₹170.
Therefore, the open offer price must be at least ₹170 or higher.
(e). 60-Day VWAP Before Trigger Date (Indirect Acquisition)
The shares of the target company must be frequently traded.
The law looks at the market price over 60 trading days before a specific cut-off date.
The cut-off date is the earlier of:
The date when the primary acquisition is contracted, or
The date when the intention/decision is publicly announced
The volume-weighted average market price (VWAP) is calculated for this period..
The price is taken from the stock exchange with the highest trading volume.
The open offer price must be at least equal to this VWAP.
Example:
Company X plans an indirect acquisition of Target Company T.
Relevant dates:
Intention announced: 1 June
Agreement signed: 15 June
Earlier date = 1 June
So, the 60 trading days before 1 June are considered.
During this period:
Shares are most actively traded on NSE
60-day VWAP = ₹145 per share
Therefore, the open offer price must be at least ₹145 or higher.
Exception:
Exception to 60-Day VWAP (Indirect Acquisition – PSU Disinvestment)
Normally, the 60-day VWAP under clause (e) is used to determine the offer price.
However, an exception applies in certain PSU cases.
The exception applies where there is a disinvestment of a Public Sector Undertaking (PSU).
The disinvestment must be carried out by:
The Central Government, or
A State Government
In such cases, the 60-day VWAP rule under clause (e) does not apply.
However, this exception applies only in a specific situation.
It is applicable only when there is a change in control of the PSU.
(f). Per Share Value under 8(5)
In certain cases, 8(5) becomes applicable.
Under such cases, a per share value is specifically computed.
This value is based on the method prescribed in 8(5).
The computed per share value must be considered while determining the offer price.
If applicable, the offer price must be at least equal to this computed value.
8(5).
Disclosure of Per Share Value (Indirect Acquisition – 15% Test)
When an indirect acquisition is taking place under Regulation 5(2) and:
The target company forms a significant portion (more than 15%) of the entity being acquired.
This is determined based on the most recent audited financial statements.
In such a case, an additional requirement arises.
The acquirer must compute the per share value of the target company.
This is the value that has been implicitly considered in the acquisition transaction.
This requirement applies notwithstanding (i.e., even if contrary to) 8(2) or 8(3).
So, it is an additional disclosure obligation, not a replacement.
The acquirer must:
Disclose this per share value in the letter of offer (LOF)
Provide a detailed explanation of the valuation methodology used.
Example:
Transaction Structure
Acquirer Ltd proposes to acquire a 60% stake in HoldCo Ltd.
HoldCo Ltd holds a 70% stake in Target Ltd, which is a listed company.
By acquiring control over HoldCo Ltd, Acquirer Ltd is indirectly acquiring control over Target Ltd.
15% Test under Regulation 5(2)
It is necessary to examine whether Target Ltd constitutes more than 15% of the value of HoldCo Ltd.
This determination is based on the most recent audited financial statements.
The total enterprise value of HoldCo Ltd is assumed to be ₹1,000 crore.
The value attributable to its investment in Target Ltd is ₹250 crore.
Accordingly, Target Ltd represents 25% of the total value of HoldCo Ltd.
Since 25% exceeds the 15% threshold, the additional disclosure requirement is triggered.
Implication of Crossing 15% Threshold
Notwithstanding Regulations 8(2) and 8(3), the acquirer is required to compute the per share value of Target Ltd.
This value represents the price implicitly embedded in the underlying transaction.
Computation of Implied Value
Acquirer Ltd is paying ₹600 crore to acquire 60% of HoldCo Ltd.
Target Ltd contributes 25% to the overall value of HoldCo Ltd.
Therefore, the portion of consideration attributable to Target Ltd is ₹150 crore (25% of ₹600 crore).
Per Share Value Calculation
Target Ltd has 5 crore outstanding equity shares.
The implied per share value is ₹30 per share.
This is computed by dividing ₹150 crore by 5 crore shares.
Disclosure Requirement
The acquirer must disclose the implied per share value of ₹30 in the Letter of Offer.
The acquirer must also provide a detailed explanation of the valuation methodology adopted.
This includes explaining how the value of Target Ltd was derived from audited financials and how the proportionate allocation of consideration was carried out.
These are the methadologies used to determine if an additional obligation is triggerred or not:
(a). Proportionate Net Asset Value (15% Test)
An indirect acquisition is taking place.
The law checks the relative importance of the target company in the overall transaction.
This is done by comparing:
The net asset value (NAV) of the target company, and
The consolidated NAV of the entity or business being acquired
The result is expressed as a percentage.
If this percentage is more than 15%, the target company is considered significant.
This triggers the requirement to compute and disclose the per share value of the target company.
Example:
Company X acquires Company Y.
From financials:
NAV of Company Y = ₹1,000 crore
NAV of Target Company (T) = ₹200 crore
Proportion = 200 / 1000 = 20%
Since 20% > 15%, the threshold is crossed.
Therefore, X must:
Calculate the per share value of T, and
Disclose the valuation method in the letter of offer.
(b). Proportionate Sales Turnover (15% Test)
When an indirect acquisition is taking place:
The law evaluates the importance of the target company based on its business activity.
This is done by comparing:
The sales turnover of the target company, and
The consolidated sales turnover of the entity or business being acquired
The result is expressed as a percentage.
If this percentage is more than 15%, the target company is considered significant.
This triggers the requirement to compute and disclose the per share value of the target company.
Example:
Company X acquires Company Y.
From financials:
Total turnover of Company Y = ₹2,000 crore
Turnover of Target Company (T) = ₹400 crore
Proportion = 400 / 2000 = 20%
Since 20% > 15%, the threshold is crossed.
Therefore, X must:
Calculate the per share value of T, and
Disclose the valuation methodology in the letter of offer.
(c). Proportionate Market Capitalisation (15% Test)
When an indirect acquisition is taking place:
The law evaluates the importance of the target company based on its market value.
This is done by comparing:
The market capitalisation of the target company, and
The enterprise value of the entity or business being acquired
The result is expressed as a percentage.
If this percentage is more than 15%, the target company is considered significant.
This triggers the requirement to compute and disclose the per share value of the target company.
Example:
Company X acquires Company Y.
From valuation data:
Enterprise value of Company Y = ₹5,000 crore.
Market capitalisation of Target Company (T) = ₹900 crore
Proportion = 900 / 5000 = 18%
Since 18% > 15%, the threshold is crossed.
Therefore, X must:
Calculate the per share value of T, and
Disclose the valuation methodology in the letter of offer
Explanation:
Computation of Market Capitalisation (for 15% Test )
While applying the market capitalisation test, the value of the target company must be calculated in a specific manner.
It is not based on a single-day price.
Instead, it is based on the volume-weighted average market price (VWAP).
The VWAP is calculated over a period of 60 trading days.
The 60-day period is taken before a specific cut-off date.
The cut-off date is the earlier of:
The date when the primary acquisition is contracted, or
The date when the intention/decision to acquire is publicly announced
The price must be taken from the stock exchange with the highest trading volume during this period.
Example:
Acquirer Ltd is proposing an indirect acquisition involving Target Ltd.
For the purpose of applying the 15% test, the market capitalisation of Target Ltd must be computed.
Relevant Date (Cut-off Date)
The agreement for the primary acquisition is entered into on 1st October 2025.
The public announcement of the intention to acquire is made on 10th October 2025.
The earlier of the two dates is 1st October 2025, which becomes the relevant date.
60 Trading Day Period
The 60 trading days are counted backward from 1st October 2025.
This period roughly covers early July 2025 to 30th September 2025 (excluding non-trading days).
VWAP Determination
During these 60 trading days, shares of Target Ltd are traded on NSE & BSE:
Assume that NSE has higher trading volume during this period.
Therefore, VWAP must be computed using NSE prices only.
Assume the 60-day VWAP = ₹120 per share.
Market Capitalisation Calculation
Total outstanding shares of Target Ltd = 5 crore shares
Market capitalisation =₹120 × 5 crore shares
Therefore, market capitalisation = ₹600 crore
8(6).
Convertible Instruments as Pricing Benchmark
The acquirer or persons acting in concert (PACs) may hold convertible instruments (e.g., warrants, convertible debentures).
These instruments can be converted into shares of the target company.
Each such instrument has a pre-determined conversion price.
For determining the open offer price, this conversion price is also considered.
It becomes an additional benchmark under sub-regulation (2) and (3).
The acquirer cannot ignore this price while computing the offer price.
If the conversion price is higher than other benchmarks, The open offer price must match or exceed it.
Example:
Acquirer holds convertible warrants in the target company.
These can be converted into shares at ₹160 per share.
Other pricing benchmarks:
Highest negotiated price = ₹150
26-week high = ₹155
Since ₹160 (conversion price) is the highest,
The open offer price must be at least ₹160 or higher.
8(7).
While determining the price paid for shares, the law adopts a broad approach.
It includes not just the stated share price, but all forms of consideration.
Any amount paid or agreed to be paid for shares, voting rights, or control over the target company is taken into account.
This includes payments made through:
The main share purchase agreement, and
Any incidental, contemporaneous, or collateral agreements.
Even if the payment is labelled differently, it is still included, such as:
Control premium , Non-compete fee and any other indirect consideration.
All such amounts are added to determine the true effective price per share.
Example:
Acquirer agrees to buy shares at ₹120 per share.
Additionally , he pays ₹30 per share as non-compete fee to promoters
Total effective price = ₹120 + ₹30 = ₹150 per share
Therefore, the open offer price must be at least ₹150 or higher.
8(8).
Suppose , The open offer is already announced and ongoing (offer period) then":
During this period, the acquirer or persons acting in concert (PACs) may:
Buy additional shares, or agree to buy shares
If any such acquisition is made at a price higher than the existing offer price, a rule is triggered.
The offer price must be revised upwards.
The revised price must be equal to the highest price paid (or payable) during the offer period.
Example:
Suppose , an open offer price is initially announced = ₹150 per share.
During the offer period: Acquirer buys shares from a shareholder at ₹180 per share
Since ₹180 > ₹150.
The offer price must be revised to ₹180.
Restriction on Acquisitions During Key Period
The acquirer is generally allowed to buy shares during the offer period.
However, there is a restricted window where acquisitions are not permitted.
The acquirer cannot acquire shares:
From the third working day before the start of the tendering period, and until the tendering period ends
This creates a “no-acquisition window” during the most sensitive phase.
8(9).
Adjustment of Offer Price for Corporate Actions
The offer price is determined using certain pricing parameters (under 8(2) and 8(3)).
However, the company may undertake corporate actions that affect share value.
In such cases, the acquirer is allowed to adjust the price parameters.
This must be done: in consultation with the manager to the offer.
Corporate actions include:
Rights issue
Bonus issue
Stock split or consolidation
Dividend payment
Demerger
Reduction of capital
This adjustment is allowed only if the record date for such corporate action falls before 3 working days prior to the start of the tendering period.
Example:
In an open offer, Target Ltd announces an offer price of ₹200 per share.
After the announcement, the company declares a 1:1 bonus issue, under which every shareholder receives one additional share for every one share held.
As a result of this bonus issue, the total number of shares in the company doubles.
The value per share is correspondingly reduced.
Since the economic value remains the same but is now spread over a larger number of shares:
The offer price must be adjusted to reflect this change.
Accordingly, the offer price is revised from ₹200 per share to ₹100 per share.
In contrast, dividends are treated differently when it comes to adjustment of the offer price.
As a general rule, no adjustment is made for dividends, particularly where the record date falls close to the tendering period.
This is because dividends are considered a normal return to shareholders and do not fundamentally alter the share structure.
Exception:
However, an exception arises where the dividend declared is unusually high.
A dividend is regarded as unusually high if:
It exceeds 50% of the average dividend per share declared by the company over the three financial years preceding the public announcement.
For instance, assume that the average dividend declared by Target Ltd over the last three financial years is ₹10 per share.
In such a case, a dividend exceeding ₹15 per share (i.e., 50% higher than ₹10) would be considered unusually high.
If the company declares a dividend of ₹12 per share, this amount does not exceed ₹15, and therefore, it is treated as a normal dividend.
In such a situation, no adjustment to the offer price is permitted.
On the other hand:
If the company declares a dividend of ₹20 per share, this exceeds the threshold of ₹15 and is therefore considered unusually high.
In this case, an adjustment to the offer price is allowed, as the dividend represents a significant distribution of value to shareholders.
8(10).
When an open offer is completed, and shareholders have tendered their shares then:
After this, the acquirer or persons acting in concert (PACs) may still acquire shares from the market.
The law monitors acquisitions made within 26 weeks after the tendering period.
If during this period, the acquirer/PACs buy shares at a price higher than the offer price, a consequence follows.
The acquirer must compensate the shareholders who participated in the open offer.
The compensation amount is:
The difference between the higher price paid later and
The original open offer price.
This payment must be made to: all shareholders whose shares were accepted in the open offer.
The payment must be made within 60 days from the date of such higher-priced acquisition.
Exceptions to 26-Week Price Protection Rule
Normally, if the acquirer buys shares at a higher price within 26 weeks after the offer, they must pay the difference to earlier shareholders.
However, this rule does not apply in certain situations.
The provision will NOT apply to the following acquisitions:
Acquisitions under another open offer:
If shares are acquired through a fresh open offer under these regulations, the price-matching obligation does not apply.
Acquisitions under the SEBI (Delisting) Regulations:
If shares are acquired as part of a delisting process, then this rule is not applicable.
Open market purchases (ordinary course):
If shares are bought through normal stock exchange transactions, the rule does not apply.
However, this applies only if the purchases are NOT negotiated deals.
Excluded transactions such as bulk deals , block deals or any negotiated acquisition are NOT exceptions to he 26 week price protection rule.
8(11).
An open offer may be made subject to a minimum level of acceptance.
This means the acquirer expects a minimum number of shares to be tendered.
The acquirer is allowed to specify an alternative (lower) price in advance.
This lower price will apply only if the minimum acceptance is not met.
However, this lower price cannot be less than the minimum price determined under the regulations.
If the minimum acceptance is achieved: the offer proceeds at the original (higher) offer price.
If the minimum acceptance is NOT achieved: The acquirer may still accept all shares tendered but at the pre-declared lower price.
Example:
Concept of Minimum Level of Acceptance
In an open offer, an acquirer may structure the transaction such that it is subject to a minimum level of acceptance.
So , the acquirer specifies in advance that a minimum number of shares must be tendered by public shareholders for the offer to proceed on the original terms.
At the time of making the open offer, the acquirer may pre-declare an alternative, lower price.
This lower price is not automatically applicable.
It is intended to apply only if the minimum level of acceptance is not achieved.
The lower price cannot be arbitrarily fixed by the acquirer.
It cannot be less than the minimum offer price determined under the applicable pricing regulations.
Scenario :
An acquirer makes an open offer for shares of Target Ltd at ₹200 per share.
The offer is made subject to a minimum acceptance of 30% of the voting capital.
The acquirer also discloses that if this minimum is not met, it may proceed at a lower price of ₹180 per share.
When Minimum Acceptance is Achieved
During the tendering period, shareholders tender 35% of the voting capital.
Since this exceeds the minimum requirement of 30%, the condition is satisfied.
The offer proceeds normally, and all accepted shares are paid at ₹200 per share.
When Minimum Acceptance is NOT Achieved
Shareholders tender only 20% of the voting capital.
The minimum acceptance condition is not fulfilled.
The acquirer is not bound to proceed at ₹200 per share.
The acquirer may still accept the tendered shares at the pre-declared lower price of ₹180 per share, subject to compliance with pricing regulations.
8(12).
In cases of an indirect acquisiton , there may be a time gap between:
The trigger date (earlier of agreement date or public announcement of intention), and
The date of the detailed public statement (DPS).
If this gap is more than 5 working days, an adjustment is required.
The offer price must be increased.
The increase is calculated as 10% per annum for the relevant time period of delay.
Example:
Acquirer Ltd proposes to undertake an indirect acquisition of Target Ltd.
The acquisition is structured through another entity, and therefore the provisions relating to indirect acquisition become applicable.
Trigger Date
The acquirer enters into a share purchase agreement on 1st January 2025.
Since this is earlier than any public announcement of intention, 1st January 2025 becomes the trigger date.
Delay in Detailed Public Statement (DPS)
The acquirer is required to make the Detailed Public Statement within a prescribed time.
However, in this case, the DPS is made only on 20th January 2025.
As a result, there is a gap of 19 days between the trigger date and the DPS.
Regulatory Threshold
The regulations permit a gap of only 5 working days without any consequence.
Since the actual delay exceeds this limit, the excess period must be identified.
The delay beyond the permitted period = 14 days.
Impact on Offer Price
Due to this delay, the acquirer is required to compensate the shareholders by increasing the offer price.
The increase is calculated at the rate of 10% per annum for the period of delay.
Computation of Adjusted Price
Assume that the original offer price was ₹100 per share.
The adjustment is calculated as: ₹100 × 10% × (14 ÷ 365)
This results in an increase of approximately ₹0.38 per share.
Accordingly, the revised offer price becomes ₹100.38 per share.
8(13).
In an open offer involving shares of Target Ltd, the acquirer determines the offer price for fully paid-up shares at ₹100 per share.
However, not all shareholders hold fully paid shares.
Some shareholders hold partly paid-up shares, where a portion of the share value is still unpaid.
In such cases, the regulations require that the offer price must be adjusted to reflect the unpaid amount.
This is because partly paid shareholders have not contributed the full value of the shares.
Therefore cannot receive the same consideration as fully paid shareholders.
Example:
Assume that a shareholder holds partly paid-up shares on which ₹30 per share is still due as calls-in-arrears
In addition, interest of ₹2 per share is payable on this unpaid amount.
Therefore, the total amount outstanding on each such share is ₹32.
While calculating the consideration payable in the open offer, the acquirer deducts this unpaid amount from the offer price of fully paid shares.
Accordingly, the offer price for the partly paid-up share is computed as ₹100 minus ₹32, which results in a net payable amount of ₹68 per share.
8(14).
In an open offer involving shares of Target Ltd:
The acquirer may come across different classes of equity shares.
These class o shares also include those carrying differential voting rights (DVRs).
These shares do not have the same voting power as ordinary equity shares.
DVR’s may carry either higher or lower voting rights, or different economic entitlements.
In such cases, the regulations allow the acquirer and the manager to the open offer to determine an appropriate offer price specifically for these DVR shares.
While determining this price, the acquirer must take into account:
The unique characteristics of DVR shares, such as reduced voting power or differential dividend rights.
Based on these factors, the price may differ from that offered to ordinary equity shareholders.
However, this flexibility is not absolute.
The acquirer cannot arbitrarily assign a price without explanation.
The regulations require that the basis and justification for the price determination must be fully disclosed.
Accordingly, the acquirer and the manager must clearly explain how and why the price for DVR shares has been determined.
This is including the factors considered and the methodology adopted.
This detailed justification must be disclosed in both the Detailed Public Statement (DPS) and the Letter of Offer (LOF).
Minimum Price for Shares with Differential Voting Rights (DVRs)
The price offered for DVR shares cannot be lower than a derived benchmark price.
In order to determine the premium percentage:
This is the percentage by which the offer price of equity shares with full voting rights exceeds the relevant price benchmark under:
8(2)(d) or 8(3)(e) as applicable.
Next, apply this same percentage premium to the:
Volume-weighted average market price (VWAP) of DVR shares
Calculated over 60 trading days
Using the same method as in the above clauses.
The resulting figure becomes the minimum permissible offer price for DVR shares.
Condition: This method applies only if both: shares with full voting rights, and shares with differential voting rights are frequently traded.
8(15).
Sometimes, a price parameter may not be available in Indian Rupees (INR).
This can happen when:
The transaction is in foreign currency, or
The benchmark price is denominated in another currency.
In such cases, the amount must be converted into INR.
The conversion must be done using the exchange rate prevailing on a specific date.
The relevant date is: the day immediately preceding the date of the public announcement (PA)
The acquirer must also ensure transparency in the conversion.
They must disclose the source of the exchange rate used.
This disclosure must be made in:
The public announcement (PA).
The detailed public statement (DPS).
The letter of offer (LOF).
8(16).
For the purposes of 8(2)(e) and 8(4):
The Securities and Exchange Board of India (Board) has the authority to require a valuation of shares.
Such valuation must be carried out by an independent registered valuer.
The cost of valuation shall be borne by the acquirer.
For evaluation assignments already in progress before the amendment came into force.
The valuation may have been undertaken by:
An independent merchant banker (other than the manager to the open offer), or
An independent chartered accountant.
Such ongoing assignments are allowed to continue under the old framework.
However, they must be completed within 9 months from:
The date of coming into force of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2025.
8(17).
While determining the offer price, market prices are usually considered.
However, sometimes share prices may move sharply due to specific events or information.
These movements may be caused by:
Material events (e.g., mergers, announcements), or
Confirmed information/news affecting the company.
Such price movements may not reflect the true fair value of the shares.
Therefore, the law allows excluding the impact of such movements.
This exclusion must be done in accordance with the framework under Regulation 30(11) of the Listing Regulations.
Regulation 9. Mode of Payment
9(1).
The offer price in an open offer may be paid using one or more specified modes.
The regulation provides five permitted modes, which are exhaustive (i.e., payment must fall within these categories).
(a). Payment in Cash
The acquirer may pay the entire consideration in cash.
This is the simplest and most liquid form of payment.
Paying by cash ensures Immediate realization of value for shareholders.
(b). Payment in Listed Equity Shares
The acquirer may pay by Issue, or Exchange, or Transfer of Equity Shares.
The shares must be Listed equity shares.
These shares may belong to The acquirer, or Any person acting in concert (PAC).
Shareholders receive equity participation instead of cash.
(c). Payment in Listed Secured Debt Instruments
Consideration may be paid through:
Issue, or
Exchange, or
Transfer of secured debt instruments
Provided that these Security Debt Instruments must be listed instruments.
These instruments must be issued by the acquirer or PACs.
The Security Debt Instruments should pass a Credit rating requirement.
The Instruments must have a rating not inferior to “investment grade”.
Rating must be given by: A credit rating agency registered with Securities and Exchange Board of India
(d). Payment in Convertible Debt Securities
Consideration may be paid via:
Issue, or
Exchange, or
Transfer of convertible debt securities.
These instruments must entitle the holder to acquire listed equity shares.
The underlying shares must be of the acquirer, or PACs.
(e). Combination of Modes
The acquirer may use any combination of:
Cash
Listed equity shares
Listed secured debt instruments
Convertible debt securities
All non-cash instruments must be Listed (ensures liquidity and transparency).
Payment can be made through Acquirer OR persons acting in concert (PACs).
Three mechanisms allowed across instruments:
Issue (new securities).
Exchange (swap).
Transfer (existing securities).
In case of debt instruments:
Investment-grade rating is mandatory.
Mandatory Cash Option in Case of Significant Prior Cash Acquisitions
The acquirer and persons acting in concert (PACs) have made recent acquisitions before the open offer.
The following ALL conditions must be satisfied:
Shares have been acquired or agreed to be acquired.
Such acquisition is within 52 weeks immediately preceding the date of public announcement.
The acquisition constitutes more than 10% of voting rights in the target company.
The consideration for such acquisition was paid in cash.
The open offer must provide an option to shareholders to receive the offer price in cash.
If a shareholder does not expressly choose any option while accepting the offer then he shall be deemed to have opted for cash.
Restriction on Changing Mode of Payment After Price Revision
When there is a revision in the offer price during the open offer process:
The general Rule is that the acquirer is allowed to alter the mode of payment of consideration after revising the offer price.
This means , the mix between cash, shares, debt instruments, etc. can be changed.
However ,
The cash component of the offer price cannot be reduced
Specifically:
The portion of consideration payable in cash before the revision must be maintained or increased, but
Cannot be decreased after revision.
Even if the acquirer restructures the consideration: They cannot shift from cash to non-cash to the detriment of shareholders.
9(2).
Strict Eligibility Conditions for Shares Used as Consideration
For the purposes of clause 9(1)(b) , 9(1)(d) , 9(1)(e) towards payment of the offer price the following conditions must be satisfied:
These clauses cover:
Shares issued, or
Shares exchanged, or
Shares transferred, or
Shares to be issued upon conversion of other securities
These shares are used towards payment of the offer price.
The following conditions must be satisfied:
(a). Listed and Frequently Traded at Relevant Time
The shares must belong to a class of shares listed on a stock exchange, and be frequently traded.
The timing requirement must be satisfied at the time of the public announcement.
(b). Minimum Listing Period of 2 Years
The same class of shares must have been listed for at least 2 years.
The period is counted immediately preceding the date of the public announcement.
(c). 95% Investor Complaint Redressal Requirement
The issuer of such shares must have redressed at least 95% of investor complaints.
The Cut-off timeline would e:
By the end of the calendar quarter immediately preceding
The calendar month in which the public announcement is made.
Important Clarification: The rederessal refers to complaints received, not just pending ones.
(d). Material Compliance with Listing Regulations
The issuer must be in material compliance with listing regulations.
This material compliance has to be completed at least 2 years immediately preceding the date of public announcement.
These are regulations issued by Securities and Exchange Board of India.
“Material compliance” implies No significant or serious violations.
If the Board is of the view that a company has not been materially compliant with the provisions of the listing regulations then:
The offer price shall be paid in cash only.
(e). Impact of the Auditor’s Qualifications
The impact of auditors’ qualifications, if any, on the audited accounts of the issuer of such shares must be within a prescribed limit.
Specifically, for each of the three immediately preceding financial years:
The impact of such qualifications must not exceed 5% of the net profit or loss after tax of the issuer for the respective year.
This requirement ensures that the issuer’s financial statements are not materially qualified and reflect a reliable financial position.
Example:
Financial Year 1:
The Net Profit after tax = 100 crore.
The Impact of qualification = 4 crore.
The Percentage impact = (4 ÷ 100) × 100 = 4%.
So , this is within limit. (Under 5%)
Financial Year 2:
The Net Profit after tax = 80 crore
The Impact of qualification = 3 crore
The Percentage impact = (3 ÷ 80) × 100 = 3.75%
So , this Within limit. (Under 5%)
Financial Year 3:
Net Loss after tax = 50 crore
Impact of qualification = 4 crore
Percentage impact = (4 ÷ 50) × 100 = 8%
This impact exceeds limit. (Above 8%) .
Since the impact exceeds 5% in one of the three years, the condition is not satisfied.
(f). Issuer should not be restricted from accesstion Capital Markets
Additionally, the Securities and Exchange Board of India must not have issued any direction against the issuer of such shares.
In particular, there should be no direction restraining the issuer from accessing the capital market or from issuing fresh shares.
Overview of the Conditions
This compliance requirement applies specifically to “such class of shares”, which means:
That the conditions must be satisfied by the same category or class of shares being offered as consideration,
It is not with respect to any just any shares of the issuer generally.
The provision covers both situations where:
Shares are directly given as consideration.
Shares are indirectly provided through conversion of other securities.
The objective is to make sure that both forms are equally regulated.
All four conditions prescribed under the provision are mandatory and cumulative in nature.
So, each and every condition must be fulfilled, and failure to comply with even one condition will result in non-compliance.
The relevant reference date for most conditions is the date of the public announcement, which is used to assess eligibility and compliance.
However, in the case of investor complaint redressal:
The reference point is different.
It is linked to the end of the calendar quarter immediately preceding the calendar month in which the public announcement is made.
9(3).
Differential Pricing Based on Mode of Consideration
Where shareholders are given multiple options for receiving consideration, such as:
Cash, or
Securities, or
A combination of both.
The offer price may differ for each option.
However, such differential pricing is subject to compliance with minimum offer price requirements under Regulation 8.
This means that each option must independently satisfy the minimum pricing rules.
Mandatory Disclosure Requirement
The acquirer must provide justification for differential pricing
This justification must be disclosed in:
The detailed public statement, and
The letter of offer.
Understanding Differential Pricing
Differential pricing arises when shareholders are offered multiple modes of consideration such as:
Cash
Securities (shares, etc.)
Combination of cash and securities
The offer price can be different for each mode
Cash option may have one price.
Share swap (securities) may imply a different value.
Such difference in pricing is permitted.
However, each option must independently comply with Regulation 8.
SEBI (SAST) Regulations, 2011 – Regulation 8
This ensures minimum offer price is maintained
The acquirer cannot use differential pricing to bypass minimum pricing rules.
There is a mandatory disclosure requirement:
The acquirer must justify why different prices are being offered
This justification must be disclosed in:
The detailed public statement (DPS).
The letter of offer (LOF).
9(4).
Compliance Requirement for Securities-Based Consideration
If the offer price includes consideration in the form of securities (such as shares, debt instruments, or convertible securities).
If such issuance of securities requires compliance with any applicable law (e.g., regulatory approvals, listing requirements, etc.) then:
The acquirer must ensure that all such compliances are completed.
The deadline for completing such compliance is not later than the commencement of the tendering period.
Consequence of Non-Compliance
If the acquirer fails to complete the required compliance by the above date then:
The acquirer shall be mandatorily required to pay the entire consideration in cash.
10(5).
Valuation of Listed Securities Offered as Consideration
Where listed securities are offered as consideration in an open offer:
The value of such securities shall be determined as the highest of the following three methods:
(a).
Take the closing prices of the securities quoted on the stock exchange.
Identify the weekly high closing price for each week.
Identify the weekly low closing price for each week.
For each week, compute the average of that week’s high and low closing prices.
Do this for all weeks during the six months preceding the relevant date.
Finally, take the average of all those weekly averages.
Example:
Take the six months preceding the relevant date and divide it into weeks.
For each week, identify the highest and lowest closing prices and compute their average.
So, for example:
Week 1: Highest - 110 & Lowest - 90. The average of the lowest and the highest is (110 + 90) ÷ 2 = 100.
Week 2: Highest - 120 & Lowest - 100. The average of the lowest and the highest is (120+100) ÷ 2 = 110.
Week 3 : Highest - 130 & Lowest - 110. The average of the lowest and the highest is (130+110) ÷ 2 = 120.
Week 4 : Highest - 140 & Lowest - 120. The average of the highest and the lowest is (140+120) ÷ 2 = 130.
After calculating the average for each week, take all those weekly averages and compute the final average:
(100 + 110 + 120 + 130) ÷ 4 = 115
(b).
Consider the two weeks preceding the relevant date.
Divide the period into Week 1 and Week 2.
For each week:
Identify the highest closing price.
Identify the lowest closing price.
Compute the average for each week: (Weekly High + Weekly Low) ÷ 2
Take the average of the two weekly averages.
The result is the final price.
(c).
Identify the stock exchange where maximum trading volume in the shares occurred.
This is determined during the 6 months prior to the relevant date.
Consider that selected stock exchange for further calculation.
Take the 60 trading days preceding the date of the public announcement.
For these 60 trading days:
Note the price at which shares were traded.
Note the volume (number of shares traded) each day.
Compute the Volume Weighted Average Market Price (VWAMP) using:
(Price × Volume for each day).
Sum of all (Price × Volume) ÷ Total Volume.
This gives the VWAMP for 60 trading days.
Determine the share exchange ratio (i.e., how many shares are offered in exchange).
Example:
Step 1: Identify stock exchange
Assume shares are traded on NSE and BSE.
During last 6 months, NSE has higher trading volume , so NSE is selected.
Step 2: Take 60 trading days before public announcement
(For simplicity, assume only 5 days data instead of 60)
Step 3: Daily data
Day 1 → Price = 100, Volume = 1,000 → 100 × 1,000 = 1,00,000.
Day 2 → Price = 110, Volume = 2,000 → 110 × 2,000 = 2,20,000.
Day 3 → Price = 120, Volume = 1,500 → 120 × 1,500 = 1,80,000.
Day 4 → Price = 130, Volume = 500 → 130 × 500 = 65,000.
Day 5 → Price = 140, Volume = 1,000 → 140 × 1,000 = 1,40,000.
Step 4: Compute totals
Total (Price × Volume) = 1,00,000 + 2,20,000 + 1,80,000 + 65,000 + 1,40,000 = 7,05,000.
Total Volume = 1,000 + 2,000 + 1,500 + 500 + 1,000 = 6,000.
Step 5: VWAMP calculation
VWAMP = 7,05,000 ÷ 6,000 = 117.5
Step 6: Share exchange ratio
Suppose:
Target company share value ≈ 117.5
Acquirer company share value ≈ 235
Exchange ratio → 1 : 2 (1 share of target = 2 shares of acquirer)
This ratio must be certified by an independent registered valuer.
Transitional Provision for Ongoing Valuation Assignments
Under circumstances a valuation assignment was already ongoing:
Such assignment must have been undertaken before the amendment regulations came into force
The amendment refers to the SEBI (SAST) (Amendment) Regulations, 2025
The valuation must be completed by:
An independent merchant banker (not being the manager to the open offer), or
An independent chartered accountant.
The ongoing valuation assignment can continue under the old framework.
However, it must be completed within 9 months.
The 9-month period starts from the date the amendment regulations come into force.
Explanation:
The term “relevant date” is specifically defined.
It refers to a date linked to the shareholders’ meeting.
Identify the date on which the shareholders’ meeting is held.
This meeting is for considering the proposed issue of shares.
The issue of shares is under Section 81(1A) of the Companies Act, 2013.
The relevant date = 30 days prior to the date of that meeting.
9(6).
Exclusion of Abnormal Price Movements in Share-Based Consideration
Under circumstances , listed equity shares are offered as consideration in an open offer then:
While determining the price of such shares, certain price movements may be excluded.
The following are excluded:
The effect on share price arising due to:
Material price movement, and
Confirmation of a reported event or information
These are typically:
Sudden or abnormal changes in price.
Triggered by specific disclosures or events.
The exclusion must be carried out: In accordance with the framework specified under Regulation 30(11) of the listing regulations.
These regulations are issued by Securities and Exchange Board of India.
