1. An Overview of
New Takeover Regulations
SEBI (SAST) Regulations, 2011

2. ON TARGET
Agenda
Need of SEBI Takeover Regulations
Highlights of SEBI Takeover Regulations, 2011
Key Definitions
Initial Threshold and Creeping Acquisition
Open Offer and its Related Concepts
New Exemptions Introduced
New Disclosure Limits

3. Need of SEBI Takeover Regulations
Announcement of Policy of Globalisation
• Opportunity for Overseas Investors
Change in India Capital Market Scenario
• Need for some regulations to protect the interest of
Investors
1994
• Enactment of SEBI (SAST) Regulations, 1994
1997
• Enactment of SEBI (SAST) Regulations, 1997
2011
• Enactment of SEBI (SAST) Regulations, 2011

4. ON TARGET
Highlights of New Takeover Regulations
Introduction of New Definitions.
Increase in Initial Threshold Limit from 15% to 25%.
Scope of Creeping Acquisition bracket widened from
15%-55% to 25%-75%:
Open Offer Trigger Point based on Individual Holding.
Increase in Offer Size from 20% to 26%.
Non-compete fees or control premium to be added to
the offer price.
Detailed provisions for Voluntary Open Offer and
Indirect Acquisition.
Recommendation on the Open Offer by the Board of
Target Company made mandatory.
Redecoration of Exemptions
Modification in Disclosure Limits

5. KEY DEFINITIONS

6. ON TARGET
NEW DEFINITIONS INTRODUCED
Acquisition
Enterprise Value
Volume Weighted Average Price
Volume Weighted Average Market Price
Weighted Average Number Of Total Shares

7. ON TARGET
ACQUISITION
means
Directly OR Indirectly
OR Agreeing to
Acquiring
Acquire
Shares OR Voting Rights OR Control
Target Company

8. ON TARGET
ENTERPRISE VALUE
means
value calculated
as
Market
Capitalization of
a Company
Minority Preferred
Debt
Interest shares
Cash
Total Cash Equivalents

9. ON TARGET
VOLUME WEIGHTED AVERAGE MARKET PRICE
“Volume weighted average market price” means the product
of the number of equity shares traded on a stock exchange and
the price of each equity share divided by the total number of
equity shares traded on the stock exchange;
Number of shares traded on the Stock Exchange on a particular day: X
Market Price: Y
X1*Y1+X2*Y2+X3*Y3………
Volume weighted Average Market Price =
X1+X2+X3……………..

10. ON TARGET
VOLUME WEIGHTED AVERAGE PRICE
“Volume weighted average price” means the
product of the number of equity shares bought and
price of each such equity share divided by the total
number of equity shares bought;
Number of shares bought on a particular day: A
Market Price: B
A1*B1+A2*B2+A3*B3………
Volume weighted Average Price =
A1+A2+A3……………..

11. ON TARGET
WEIGHTED AVERAGE NUMBER OF TOTAL SHARES
“Weighted average number of total shares” means the
number of shares at the beginning of a period, adjusted for
shares cancelled, bought back or issued during the aforesaid
period, multiplied by a time-weighing factor;

12. ON TARGET
DEFINITIONS MODIFIED
Control
Frequently Traded Shares
Identified Date
Shares

13. ON TARGET
CONTROL
Director or officer of target company shall not be considered to be in control
over target company merely by virtue of holding such position

14. ON TARGET
QUERY
Meaning of Term Negative Control and the applicability of SEBI Takeover
Regulations on the same?
Exemption Rejected in the matter of acquisition of shares of Daikaffil
Chemicals India Limited (Order dated 14.02.2007)
•Acquirer Proposes to acquire 25.10% voting rights through Preferential
Allotment.
•Increase in shareholding from Nil to 25.10%.
•Exemption Rejected as the acquirer will acquire Negative Control over the
Company.

15. ON TARGET
FREQUENTLY TRADED SHARES
2011
Regulations
• Trading
Turnover • Trading
of 5% Turnover
of 10%
1997
Regulations

16. ON TARGET
IDENTIFIED DATE
SPECIFIED DATE IDENTIFIED DATE
Not later than Falling on
30th day 10th working day
from PA. prior to the tendering
period.

17. ON TARGET
SHARES
The scope of definition has been Broadened.
Inclusion of Depository Receipts within the ambit of term shares.
Holder of the depository receipts is treated at par with the one who
acquired the Equity Shares carrying voting rights.

18. INITIAL THRESHOLD AND CREEPING ACQUISITION

19. ON TARGET
INITIAL THRESHOLD
SEBI Takeover SEBI Takeover
Regulations, 1997 Regulations, 2011
• 15% • 25%

20. ON TARGET
CREEPING ACQUISITION ZONE REDEIFINED
SEBI Takeover SEBI Takeover
Regulations, 1997 Regulations, 2011
• 15%-55% • 25%-75%
Creeping
Acquisition
5% in each FY

21. ON TARGET
KEY POINTS
No Netting off Allowed *
Individual shareholding to be
considered for Open Offer
*This is also provided in SEBI clarification dated
August 6, 2009

22. ON TARGET
KEY POINTS
 Incremental voting rights in case of fresh issue to be considered
Suryajyoti Spinning Mills Ltd (Informal
Guidance-02.04.2009)
Bhumika Trading Pvt. Ltd. (Informal
Guidance-28.01.2008)
Adhunik Metaliks Ltd. (Informal
Guidance-09.04.2008)
 Shares acquired during 1/4/2011 to 22/10/2011 will also be taken in to
account for the purpose of determining the creeping acquisition limit.

23. ON TARGET
KEY POINTS
Can the acquisitions, resulting from any agreement attracting the
obligation to make an open offer, be completed by way of
transactions settled on Stock exchange such as bulk/block deals?
No.
Since the same would result in completion of the triggering
acquisition before the expiry of the offer period and would be
against the provisions of regulation 22(1).

24. OPEN OFFER AND ITS RELATED CONCEPTS

25. ON TARGET
CHANGE IN CONTROL
• Through • Through
Shareholder Shareholder
Approval Approval
SEBI (SAST) SEBI (SAST)
Regulations, 201 Regulations, 199
1 7

26. ON TARGET
QUERY
What is the impact of withdrawal of alternative for
the change in control by shareholder approval?

27. ON TARGET
MINIMUM OFFER SIZE
SEBI (SAST) SEBI (SAST)
Regulations, 1997 Regulations, 2011
Mandatory Offer
20% 26%
Voluntary Offer
10%

28. ON TARGET
OFFER PRICE
Separate Criteria’s in case of Direct and Indirect Acquisition
Volume-weighted average market price instead of the simple
average
60 trading days average instead of 26 weeks or 2 weeks

29. ON TARGET
VOLUNTARY OPEN OFFER
• Prior holding of atleast 25% or more shares;
Eligibility • No acquisition during the preceding 52 weeks
without attracting the obligation to make a public
announcement.
• The aggregate shareholding not exceeds the
Condition maximum permissible non-public shareholding.
• No further acquisition of shares for a period of
six months after completion of the open offer
Restriction except by way of another voluntary open offer or
competing offer.

30. ON TARGET
CAN PERSON HOLDING <25% MAKE VOLUNTARY OFFER
Yes.
Subject to the minimum offer size of 26%.

31. ON TARGET
PUBLIC ANNOUNCEMENT (PA)
Public Detailed Public
Announcement Statement
• On the same day or • Within 5 working
as specified under days from PA
the Regulation 13

32. ON TARGET
TIMING OF PUBLIC ANNOUNCEMENT (PA)
Event Time
Agreement On the same day
Market Purchase of shares Prior to the placement of purchase order with
the stock broker.
This is against the provisions of regulation 22(1).
Preferential Allotment Date of Special Resolution
Voluntary Offer On the same day when the Acquirer decides to
make Voluntary Offer
Increase in voting rights pursuant Not later than 90th day from the date of increase
to a buy-back not qualifying for in voting rights.
exemption under Regulation 10 .

33. ON TARGET
NON COMPETE FEES
SEBI (SAST) SEBI (SAST)
Regulations, 1997 Regulations, 2011
Upto 25% of the offer
Price To be included in the
(Not to be included in the Offer Price
Offer Price)

34. ON TARGET
RECOMMENDATION ON THE OFFER BY BOARD
SEBI (SAST)
Regulations, 199 • Optional
7
SEBI (SAST)
Regulations, 201 • Mandatory
1

35. ON TARGET
COMPLETION OF ACQUISITION UNDER THE AGREEMENT
SEBI (SAST) Regulations, 1997
• Not Allowed (Until the Completion of Offer formalities)
SEBI (SAST) Regulations, 2011
• Allowed
• After a period of 21 working days from PA
• Deposit of 100% consideration in the Escrow Account

36. ON TARGET
INCREASE IN SHAREHOLDING BEYOND MAXIMUM
PERMISSIBLE NON PUBLIC SHAREHOLDING AFTER THE
OPEN OFFER
Ineligibility to make voluntary
Obligation to bring down the delisting offer for a period of 12
shareholding months from the completion of
Offer Period

37. ON TARGET
QUERY
In case the Acquirer intends to voluntarily delist the Target
Company, then whether he can keep the Target Company in
violation of clause 40A for a period of 12 Months?

38. ON TARGET
ACQUISITION AFTER THE TENDERING PERIOD
Payment of
Acquisition during 26
At a price higher difference between
weeks after
than offer price highest price and
Tendering Period
offer price
To the shareholders
whose shares are Within 60 days from
accepted in the offer such acquisition

39. ON TARGET
KEY POINT
Once a shareholder has tendered
his shares in the open offer made
by the Acquirer, than he/ she
cannot withdraw or revise his/her
request.

40. NEW EXEMPTIONS INTRODUCED

41. ON TARGET
ACQUISITION-CORPORATE DEBT RESTRUCTURING
Conditions
No change in control
Shareholders’ Approval by way of Special Resolution passed
by Postal Ballot.

42. ON TARGET
ACQUISITION-BUY BACK
Pre Holding Pre Holding
<25% between 25-75%
Exemption Shareholders Resolution/Board
Resolution, as the case may be.
(Subject to Acquirer
Reducing Its
Shareholding Below Acquirer not voted in favor of
resolution
the threshold within a
period of Ninety Days
from the date of such
increase) No change in control.

43. ON TARGET
ACQUISITION-PREFERENCE SHARES CARRYING VOTING
RIGHTS
Preference
Acquisition of
shares carrying
Voting Rights
voting rights
In terms of Section 87(2) of
the Companies Act, 1956

44. ON TARGET
NO AMBIGUITY IN REPORTING THE DETAILS OF
EXEMPTION
{As given in Regulation 3(4) of SEBI (SAST)
Regulations, 1997}

45. NEW DISCLOSURES LIMITS

46. ON TARGET
DISCLOSURE LIMITS
Event Based Disclosure
Acquisition of ≥5% Change of ≥ 2% after the 5%
Continual Disclosures
Persons holding ≥25% Every Promoter
Encumbered Shares
On the encumbrance, Invocation or release of encumbrance
No obligation on the Target
Company to give the disclosure
to Stock Exchange.

47. ON TARGET
KEY POINT
Aggregate shareholding of Acquirer and PACs to be considered for making the
disclosure.
Radheshyam Tulsian V.
SEBI
(SAT-26.04.2006)
Mega Resources Limited
v. SEBI
(SAT-19.03.2002)

48. ON TARGET
KEY POINT
Acquisition and Holding of any convertible security shall
also be regarded as shares and disclosures of such
acquisitions and holdings shall be made accordingly.

49. ON TARGET
FOR EXAMPLE
Company A 100 50 PCDs 10 GDRs Total Total Disclosure
equity Shares: Voting
shares 160 Rights:
110
B holding in 8 Equity 7 PCDs 1 GDR 16 Equity 9 Voting
Company A Shares Shares Rights
(10%) (8%)
Scenario I
“B” Acquires 2 Equity 2 PCDs - 4 Equity 2 Voting Disclosure
Shares Shares Rights under
(2.5%) (1.8%) regulation
29(2).
Scenario II
“B” Acquires - 20 PCDs - 20 Equity - Disclosure
Shares under
(12.5%) regulation
29(2)

50. ON TARGET
KEY POINT
Encumbrance” shall include a pledge, lien or any such transaction,
by whatever name called.”
In other words, those encumbrances which entail a risk of the
shares held by promoters being appropriated or sold by a third
party, directly or indirectly, are required to be disclosed to the stock
exchanges in terms of the Takeover Regulations, 2011.

51. ON TARGET
PAVAN KUMAR VIJAY
Corporate Professionals Capital Private Limited
D-28, South Extension -I,
New Delhi-110 049
Ph: +91.11.40622200; Fax: +91.11.40622201
E: pkvijay@indiacp.com