SEBI has amended the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Under the amended Takeover Code, in the event the acquirer makes a public announcement of an open  offer for acquiring shares of a target company in terms of regulations 3, 4 or 5, he may instead  delist the company in accordance with the provisions of the Securities and Exchange Board of India  (Delisting of Equity Shares) Regulations, 2009, provided that the acquirer shall have declared  upfront his intention to so delist at the time of making the detailed public statement.

Where an offer to delist the target company has failed, the acquirer is required to make an  announcement within 2 working days of such failure. Thereafter, the acquirer shall be liable to  proceed with the open offer as per the Takeover Regulations. Consequently, the acquirer will file  the draft letter of offer with SEBI within 5 working days of the announcement. Shareholders who  have tendered shares in the delisting offer can withdraw their shares, within 10 working days from  the date of such announcement. Shareholders who have not tendered their shares in acceptance of the  delisting offer shall be entitled to tender their shares in acceptance of the open offer.

In case of failure of delisting offer, offer price shall stand enhanced by an amount equal to a sum  determined at the rate of 10 per cent per annum for the period between the scheduled date of  payment of consideration to the shareholders and the actual date of payment of consideration to the  shareholders. For this purpose, the scheduled date shall be the date on which the payment of  consideration ought to have been made to the shareholders in terms of the timelines in these regulations.

In a manner similar to Delisting Regulations, amendment to the Takeover Code has permitted  tendering of shares and their settlement through the stock exchange mechanism.


VA View

SEBI has permitted takeover and delisting to take place in a composite manner. Permitting delisting  pursuant to open offers is a welcome step which may result in reduced cost of acquisition and may act as impetus for M&A activities in India.