Open Offer

When a big investor quietly buys up a chunk of a listed company, what protects the small shareholders who were never asked? In India, the answer is the open offer, a cornerstone of the country's takeover rules.

When an open offer gets triggered

Open offers are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, usually just called the Takeover Code or SAST.

The main trigger is the 25% threshold. The moment an acquirer's voting rights cross 25%, they must make an open offer to the company's public shareholders. A second trigger catches creeping acquisitions: an investor already holding between 25% and 75% who buys more than 5% in a financial year must also make an offer. Acquiring "control" of the company, regardless of the exact stake, triggers it too.

This 25% level was deliberately raised from the old 15% in 2011, on the reasoning that 15% rarely amounts to real control in Indian companies, so the lower bar was forcing unnecessary offers.

What it means for minority holders

The point of an open offer is fairness. When ownership of a company changes hands, ordinary shareholders should get a chance to exit at a fair price rather than being trapped under a new controlling owner they never chose.

So an open offer must be made for at least 26% of the company's shares, at a minimum price calculated under SEBI's formula, which looks at recent market prices and the price the acquirer paid. As a public shareholder, you can choose to tender your shares into the offer and exit, or hold on if you believe in the new ownership.

How to read one

When you see an open-offer announcement, check the offer price against the current market price. If the offer is well below where the stock trades, few will tender; if it is at a premium, it can put a floor under the price. The detailed Letter of Offer spells out terms and timelines.

The takeaway: an open offer is not a takeover formality to ignore. It is your guaranteed exit window and a signal that control is shifting, so read the price and the acquirer carefully before deciding whether to stay or step out.