The open offer price is a floor computed backwards from the announcement, which is why it is so often below the screen by the time you can tender
The short answer
A mandatory open offer is triggered by one of three things: crossing 25 percent of voting rights, acquiring more than 5 percent in a financial year while already at or above 25 percent, or acquiring control at any shareholding at all. The offer must be for at least 26 percent of voting capital. The price is the highest of a defined set of references, every one of which looks backward from the date of the public announcement. Those references freeze on announcement day while the tendering window opens roughly two calendar months later, so the offer price is frequently below the market price by the time you can act. And when the offer is oversubscribed, acceptance is proportionate, so what you realise on the whole holding is a blend of the offer price and the market price, never the offer price itself.
A public announcement lands, the headline reports an open offer above the previous close, and the stock is read as carrying an underwritten exit. It does not. What exists is a floor computed from prices that have already happened, and a window to use it that opens about two months later.
The second misreading is the subscription number. A heavily oversubscribed offer is reported as confidence and a thin one as rejection. It is neither. Subscription is an arbitrage readout: the offer fills when its price beats the screen and empties when it does not.
Four routes in, and one of them has no percentage
The takeover regulations do not define a takeover. They define events that create one obligation: announce an offer to the public on terms no worse than the block received. Regulation 3(1) is the initial threshold, where an acquirer with persons acting in concert reaches 25 percent of the voting rights. The test is on the aggregate, so a stake spread across related entities counts once.
Regulation 3(2) is the creeping limit. A holder already at or above 25 percent, and below the maximum permissible non-public shareholding, may add up to 5 percent of voting rights in a financial year ending 31 March. The limit is gross rather than net, so selling does not reset the count, and it starts again each year, which is what makes slow consolidation possible.
Regulation 4 has no number in it. Control triggers an offer irrespective of the acquisition or holding of any shares at all. Control means the right to appoint a majority of the directors, or to control the management or policy decisions, directly or indirectly, including by virtue of shareholding, management rights, shareholders agreements or voting agreements. An investor at 9 percent who negotiates a majority of the board has triggered an offer.
Regulation 5 closes the gap. Acquiring an entity that itself holds the threshold stake or control attracts the same obligations, so a listed company cannot be reached through its parent.
| Route | The test | What it catches |
|---|---|---|
| Initial threshold, regulation 3(1) | Shares or voting rights taking the acquirer and persons acting in concert to 25 percent or more | The first substantial stake, across however many entities |
| Creeping acquisition, regulation 3(2) | More than 5 percent of voting rights in a financial year, by a holder already at 25 percent or more and below the maximum permissible non-public shareholding | Accumulation in steps too small to trip the first test |
| Acquisition of control, regulation 4 | Control acquired, whether or not any shares are acquired and at any level of holding | Rights obtained by agreement rather than by purchase |
| Indirect acquisition, regulation 5 | Acquiring the entity that holds the threshold stake or control in the target | Reaching the company through its parent |
| Voluntary offer, regulation 6 | A holder of 25 percent or more choosing to offer, minimum 10 percent | Consolidation where no trigger has occurred |
Why the obligation exists at all
Control has a value separate from the shares that carry it. A block that delivers the board is worth more per share than the same shares in hands that cannot use them that way, so a block holder can sell at a premium no other shareholder could obtain.
The regulations neither prohibit that premium nor try to price it. They require the acquirer to extend the same opportunity to everyone else at a price no lower than the block received. The premium can still be paid; it cannot be paid privately. What is never promised is that the offer will be attractive, only that it will not be worse than what the block was paid.
The price is the highest of several references, and every one looks backward
Regulation 8 does not ask what the shares are worth. It asks what has already been paid for them, by whom, over what window, and takes the largest answer.
For frequently traded shares, meaning traded turnover over the twelve calendar months preceding the month of the announcement of at least 10 percent of the total shares, four references apply: the highest negotiated price under the triggering agreement, the volume weighted average price the acquirer and persons acting in concert paid over the preceding 52 weeks, the highest price they paid over the preceding 26 weeks, and the volume weighted average market price over the 60 trading days before the announcement.
Three of the four describe the acquirer, not the company. That is the design. The regulation is not valuing a business. It is making it impossible to offer the public less than the acquirer has itself recently been willing to pay.
Where the shares are infrequently traded the market reference falls away, because a thin tape cannot be trusted, and a price on valuation parameters takes its place. Where the acquisition is indirect the references anchor to the upstream transaction date, with interest at 10 percent a year added for the gap.
| Reference | Window | What it prevents |
|---|---|---|
| Highest negotiated price under the triggering agreement | The transaction itself | Paying the outgoing block more than the public is offered |
| Volume weighted average price of the acquirer's own acquisitions | 52 weeks before the announcement | Building a stake at higher prices and then offering less |
| Highest price paid by the acquirer or persons acting in concert | 26 weeks before the announcement | Timing the announcement for just after the acquirer's own high |
| Volume weighted average market price | 60 trading days before the announcement | Announcing into a dip and calling the dip the value |
| Price on valuation parameters, infrequently traded shares only | Not a window. An independent valuation | Using an illiquid tape to argue the shares are worth little |
| Per share value in an indirect acquisition, plus 10 percent a year | From the upstream transaction date | Reaching the company through a parent and letting delay run free |
The floor cannot fall, and there are three ways it can rise
There is no downward revision anywhere in the takeover regulations. Once announced the price is a floor in the strict sense, and the market can do what it likes underneath it. All three revision mechanisms run the same way, which is what makes the floor worth having and exactly why it goes stale.
Voluntary revision. Regulation 18(4) allows the acquirer to revise upward until the last one working day before the tendering period commences. After that the number is final whatever happens next.
Automatic revision. Under regulation 8(8) any acquisition by the acquirer during the offer period at a price above the offer price lifts the offer price to that price, and buying is restricted from the third working day before the tendering period until it expires.
Interest for a late announcement. Under regulation 8(12) an announcement made after the obligation arose carries interest at 10 percent a year for the delay. Sitting on a triggering transaction is expensive.
Why the offer is so often below the screen
The public announcement is made on the date the acquirer agrees to acquire, under regulation 13, before the market has processed anything. Everything after that takes working days.
| Step | Deadline | Provision |
|---|---|---|
| Public announcement | On the date of the agreement or before the market purchase | Regulation 13 |
| Escrow funded | No later than 2 working days before the detailed public statement | Regulation 17 |
| Detailed public statement | Within 5 working days of the announcement | Regulations 13 and 14 |
| Draft letter of offer filed with the regulator | Within 5 working days of the detailed public statement | Regulation 16(1) |
| Observations from the regulator | Within 15 working days of the filing | Regulation 16(4) |
| Letter of offer dispatched | Within 7 working days of the observations | Regulation 18(2) |
| Tendering period opens | No later than 12 working days from the observations | Regulation 18(8) |
| Tendering period stays open | 10 working days | Regulation 18(8) |
| Payment to accepting shareholders | Within 10 working days of the close, with interest at 10 percent a year on delay | Regulation 21 |
Add the middle column and the announcement sits about 37 working days ahead of the day the window opens, roughly seven and a half calendar weeks. Add the window and the payment leg and announcement to money is close to three calendar months.
Every price reference in regulation 8 ends on day zero. Two calendar months of price discovery then happen with the offer price frozen, and the event that started the clock is usually the largest piece of new information the company produces that year. The market re-rates on a change of control. The floor does not.
The result looks perverse until the mechanism is visible. If the market trades above the offer price during the window, tendering is worse than selling on the screen, and worse still because only part of what is tendered will be accepted. Almost nobody tenders. If the market trades below, tendering is the better exit and the offer overflows.
So an open offer is oversubscribed precisely when it is worth taking and undersubscribed precisely when it is not. The acceptance ratio is a price comparison expressed as a percentage, and reading it as sentiment gets the causation backwards.
An open offer at a premium is therefore a statement about announcement day and about the negotiated block, not about the price available on the day you can act. A stock that has run since the announcement carries an offer price that is now a discount.
Twenty six percent, and what happens to the rest of what you tender
Regulation 7(1) fixes the minimum offer size at 26 percent of the total shares, measured as of the tenth working day from the closure of the tendering period, so that convertibles vesting in the interim are counted. Twenty six is calibrated rather than round: added to a 25 percent stake it carries the acquirer past half the company, which is what a change of control usually needs.
The offer size is also a ceiling. Tender more than it can absorb and the acquirer accepts proportionately, so every tendering shareholder gets the same fraction taken and the balance returns to the demat account.
The blended realisation is the number that matters and it is never the headline. The two effects also push against each other. An offer priced far above the screen draws heavy tendering, which cuts the acceptance ratio, which shrinks the slice of the holding that receives the attractive price. An offer priced below the screen has a generous acceptance ratio attached to a price you did not want.
| Market above the offer | Market below the offer | |
|---|---|---|
| Offer price, fixed on announcement day | 412 | 412 |
| Market price during the tendering window | 448 | 368 |
| Shares tendered | Nil, the screen is the better exit | 1,000 |
| Acceptance ratio across the offer | Barely taken up | 65 percent, oversubscribed |
| Shares accepted at the offer price | Nil | 650 |
| Shares returned | Nil | 350 |
| Realised on the holding | 4,48,000 on the screen | 3,96,600 blended |
| Effective price a share | 448 | 396.60 |
| The headline in both states | Open offer at 412. In neither state is that what the holding receives. | |
The escrow, and what it actually secures
On a company with 10 crore shares, a 26 percent offer is 2.6 crore shares, and at 412 a share the obligation is 1,071.2 crore rupees. The escrow is 125 crore on the first slab plus 57.12 crore on the balance, so 182.12 crore against an obligation more than five times larger.
That ratio says what the escrow is for. It is not a payment guarantee and was never structured as one. It makes the announcement expensive to abandon and proves the funds existed before the acquirer spoke. Payment is enforced separately, by the ten working day deadline and interest at 10 percent a year on delay.
| Situation | Amount required | Form permitted |
|---|---|---|
| Consideration up to 500 crore rupees | 25 percent of the consideration | Cash with a scheduled commercial bank, a bank guarantee from one, or shares of the target already held, capped at half the escrow |
| Consideration above 500 crore rupees | 25 percent of the first 500 crore plus 10 percent of the balance | As above |
| Offer conditional on a minimum level of acceptance | The higher of the full consideration for that minimum and half the total | Cash |
| Completing the underlying transaction before the offer closes | The full consideration payable, and not before 21 working days from the detailed public statement | Cash, under regulation 22(2) |
The last row matters most. Regulation 22(2) lets the parties complete the underlying transaction 21 working days after the detailed public statement provided the full consideration is deposited, and on the standard calendar that falls before the tendering window opens. Control has usually changed hands by the time the public is invited to exit.
What changed for the valuation side in January 2026
The pricing machinery has been stable since 2011, which is why most published explanations of it are still broadly right. One piece moved recently, and pages written before December 2025 name the wrong professional.
The SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2025 were notified on 3 December 2025 and come into force on the thirtieth day from publication in the Gazette, which places them in early January 2026. They introduce valuer as a defined term, taking its meaning from section 247 of the Companies Act 2013.
So where shares are infrequently traded and the price rests on valuation parameters, that valuation is now the work of an independent registered valuer rather than of the acquirer and the manager to the offer. The same independence applies where the consideration is listed securities rather than cash, and the regulator keeps the power under regulation 8(16) to require a valuation at the acquirer's own cost. The one part of the framework an acquirer could influence has been moved away from the acquirer.
The position of a shareholder who does not tender
The free float shrinks by whatever the offer took, up to 26 percentage points of the capital. Thinner float means wider spreads and larger price impact on ordinary order sizes, and that persists long after the offer period ends.
If the offer takes the acquirer above the maximum permissible non-public shareholding, regulation 7(4) requires the float to be restored within twelve months, which schedules a supply event whose timing is fixed by regulation rather than by the market. Regulation 7(5) adds that such an acquirer cannot make a voluntary delisting offer for twelve months from completion of the offer period, so a delisting, if one is coming, is at least a year away and priced under a different mechanism.
The floor also expires with the window: nothing binds the market price once the tendering period closes. What does work in the informed holder's favour is regulation 29, which requires an acquirer crossing 5 percent to disclose within two working days and every change of 2 percent after that. Stake building is visible in the filings before it becomes an announcement.
Where the reading goes wrong
Treating the offer price as a valuation. It is the highest of several things that already happened, and carries no forward view of the business.
Assuming the whole holding exits at the offer price. Proportionate acceptance means the headline applies to a fraction, and the fraction shrinks as the offer gets more attractive.
Expecting the price to be raised to meet the market. Upward revision under regulation 18(4) is permitted, not required, and the window shuts one working day before the tendering period commences.
Buying after the announcement in order to tender. The floor was struck on announcement day. Paying today's price against a fixed number, and receiving that number on part of the position, is a different trade from the one the headline describes.
Confusing an open offer with a buyback. In a buyback the company spends its own cash and cancels the shares, so the count falls. In an open offer a third party spends its own money and keeps them, so only the controller moves.
What the open offer is actually for
It is an exit right, not a payday. Its job is to stop a control premium being paid privately while everyone else is left inside a company whose direction they did not choose. Measured against that it works: the block cannot be paid more than the public is offered, and the price cannot be marked down when the market weakens.
What it was never built to do is deliver the best available price on the day you can act. The useful question is not whether the price is a premium. It is where the screen is likely to be against a fixed number two months out, and what fraction of the holding a proportionate acceptance will take. Read the mechanism, compute the number that reaches the account, and treat the headline as somebody else's transaction.
Frequently asked questions
What actually triggers a mandatory open offer?
Three independent events. Acquiring shares or voting rights that take the acquirer with persons acting in concert to 25 percent or more, under regulation 3(1). Acquiring more than 5 percent of voting rights in a financial year while already at or above 25 percent, under regulation 3(2). And acquiring control at any level of holding, under regulation 4. Regulation 5 applies the same obligations where the target is reached through its parent.
Can an open offer be triggered without buying a single share?
Yes. Regulation 4 attaches to control rather than to a percentage, and control includes the right to appoint a majority of the directors or to control management or policy decisions, whether it comes from shareholding, management rights, shareholders agreements or voting agreements. A right negotiated well below 25 percent can create the obligation.
How is the offer price decided?
It is computed, not decided. For frequently traded shares regulation 8(2) takes the highest of four references: the negotiated price under the triggering agreement, the volume weighted average price the acquirer paid over the preceding 52 weeks, the highest price it paid over the preceding 26 weeks, and the 60 trading day volume weighted average market price.
Can the offer price be reduced if the market falls after the announcement?
No. There is no downward revision anywhere in the takeover regulations. It moves up only: voluntarily under regulation 18(4) until one working day before the tendering period commences, automatically under regulation 8(8) if the acquirer pays more during the offer period, and by interest at 10 percent a year under regulation 8(12) where the announcement was late.
Why is the offer price often below the market price by the time I can tender?
Because the references stop on announcement day while the window opens about 37 working days later: five to the detailed public statement, five to file the draft letter of offer, up to fifteen for the observations of the regulator, and up to twelve more under regulation 18(8). Two calendar months of price discovery happen after the number is frozen.
If I tender all my shares, do they all get bought?
Only if the offer is undersubscribed. The offer size is a ceiling of at least 26 percent of voting capital, so when more is tendered than it can absorb, acceptance is proportionate and every tendering shareholder has the same fraction taken. Tender 40 percent of the capital into a 26 percent offer and the acceptance ratio is 65 percent.
What happens to the shares that come back?
They return to the demat account as ordinary shares, so the exit on the whole holding is a blend. On an illustrative 1,000 shares at a 65 percent acceptance ratio, an offer price of 412 and a market price of 368, the realisation is 3,96,600 rupees, or 396.60 a share.
Does a heavily oversubscribed open offer mean the company is doing well?
It means the offer price was above the screen during the tendering window. Subscription is a price comparison, not an opinion about the company or the acquirer. Offers fill when tendering beats selling and empty when selling beats tendering.
Is an open offer the same as a buyback?
No. In a buyback the company spends its own cash on its own shares and cancels them, so the count falls and every remaining holder owns more of what is left. In an open offer a third party spends its own money and keeps the shares, so the count is unchanged and only the controller moves.
Stated as at 18 September 2026. The takeover regulations are amended frequently, and all prices and acceptance ratios in the worked examples are illustrative. This page explains a mechanism and is not advice on whether to tender. Read the letter of offer in front of you, confirm the current text of the regulations, and take advice on your own facts.
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