Open Offer in Share Market: When SEBI’s Takeover Code Makes a Buyer Bid for Your Shares

You open your broker app one morning and there’s a notice you didn’t ask for: someone wants to buy your shares, at a fixed price, and you have ten working days to decide. That is an open offer in share market terms, and it almost always means control of the company is changing hands. SEBI’s takeover code forces the new buyer to make that offer, so that small shareholders get a chance to exit on terms close to what the big seller got.

Most retail investors meet an open offer once or twice in their investing life and have no idea what to do with it. So we’ll go through what triggers one, how much the buyer has to bid for, how the minimum price is worked out, the timeline from announcement to payment, and a worked example of what actually lands in your account when more people tender than the offer can absorb.

What an open offer in share market means

An open offer is a public bid by an acquirer to buy shares from the public shareholders of a listed company. The rules sit in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, usually called the SAST Regulations or simply the takeover code. The version we checked is SEBI’s consolidated text, amended up to December 5, 2025.

The logic is simple enough. When someone buys a large block from a promoter, they often pay a premium for control. The takeover code says that premium can’t be a private deal between two parties while everyone else is left holding a stock whose owner, strategy and board may all be about to change. The buyer has to extend an offer to the rest of the shareholders as well.

What triggers a mandatory open offer

There are three main triggers, and they are worth keeping separate in your head.

Crossing 25%. Regulation 3(1) says no acquirer can buy shares or voting rights that, together with what they and persons acting in concert with them already hold, take them to 25% or more of the voting rights, unless they make a public announcement of an open offer. “Persons acting in concert” is the regulator’s way of saying you can’t dodge the rule by splitting the stake across friends and group companies.

Creeping past 5% a year. Once a group already holds 25% or more, but less than the maximum permissible non-public shareholding, Regulation 3(2) caps further buying at 5% of the voting rights within any financial year (April to March, as the regulations define it). Going beyond that needs an open offer. The regulations count gross acquisitions only, so selling a bit in between and buying it back does not reset the meter.

Acquiring control. Regulation 4 is the catch-all. Irrespective of how many shares are bought, anyone acquiring control over a listed company, directly or indirectly, has to make an open offer. This is the one that bites when a buyer picks up, say, 20% plus the right to appoint most of the board.

Regulation 3(3) adds a detail that trips people up: if one individual member of a group crosses a threshold on their own, that also triggers the obligation, even if the group’s combined holding hasn’t changed.

There is also a voluntary route. Under Regulation 6, a group that already holds 25% or more, but less than the maximum permissible non-public shareholding, can choose to make an open offer without being forced to. Regulation 7(2) says that offer must be for at least an additional 10% of the voting rights.

An open offer is the takeover code’s way of saying the control premium can’t stay a private deal between two parties.

How big the offer has to be

A mandatory open offer under Regulations 3 and 4 must be for at least 26% of the total shares of the target company, according to Regulation 7(1). The share count is taken as of the tenth working day from the closure of the tendering period, and it has to account for any potential increases in the number of outstanding shares already contemplated when the offer was announced.

Here is the bit retail investors often miss. 26% is the offer size, not a promise to buy all your shares. If the public tenders more than 26%, the acquirer is not obliged to take everything. SEBI’s FAQ on the SAST Regulations explains that when validly tendered shares are more than the offer size, tenders are accepted on a proportionate basis. We’ll work through what that means in rupees below.

And if the acquirer ends up above the maximum permissible non-public shareholding after the offer, Regulation 7(4) requires them to bring it down within the time allowed under the Securities Contracts (Regulation) Rules, 1957.

How the minimum offer price is worked out

The buyer doesn’t get to pick a number out of the air. For a direct acquisition, Regulation 8(2) says the offer price must be the highest of these:

• (a) the highest negotiated price per share under the agreement that triggered the offer;
• (b) the volume-weighted average price paid or payable by the acquirer or persons acting in concert during the 52 weeks before the public announcement;
• (c) the highest price paid or payable by them for any acquisition during the 26 weeks before the public announcement;
• (d) for frequently traded shares, the volume-weighted average market price over the 60 trading days before the public announcement, on the exchange with the most trading volume in the stock;
• (e) for shares that are not frequently traded, a price set by an independent registered valuer using parameters like book value and comparable trading multiples;
• (f) a per-share value under Regulation 8(5), where that applies.

“Frequently traded” has a precise meaning in Regulation 2(1)(j): the traded turnover on any exchange during the twelve calendar months before the month of the public announcement is at least 10% of the total shares of that class.

Why does the “highest of” structure matter to you? Because it stops the buyer from paying the promoter ₹500 behind closed doors and offering the public ₹400. Parameter (a) alone closes that gap. Parameter (d) stops a buyer from lowballing a stock that has been trading well above the negotiated price.

The acquirer can raise the price, though not lower it. Under Regulation 18(4), upward revisions to the price or the number of shares are allowed any time before the start of the last one working day before the tendering period opens. Older explainers say three working days; that was changed in 2018, and the consolidated text now reads one working day.

The open offer timeline, step by step

Dates matter here more than in most corporate actions, because you have a narrow window to act. Pulling the main steps from the regulations and the SEBI FAQ:

1. Public announcement. Made to the stock exchanges and SEBI on the day of the triggering event in most cases, per the FAQ.
2. Escrow. At least two working days before the detailed public statement, the acquirer must create an escrow account (Regulation 17(1)).
3. Detailed public statement (DPS). Published in newspapers within five working days of the public announcement, as the FAQ describes.
4. Draft letter of offer. Filed with SEBI within five working days of the DPS (Regulation 16(1)).
5. Independent directors’ view. A committee of the target’s independent directors publishes written, reasoned recommendations at least two working days before the tendering period starts (Regulation 26(7)).
6. Pre-offer advertisement. One working day before tendering opens, giving the schedule and the status of approvals (Regulation 18(7)).
7. Tendering period. Starts within twelve working days of receiving SEBI’s comments and stays open for ten working days (Regulation 18(8)).
8. Payment. All requirements, including paying shareholders whose shares were accepted, must be completed within ten working days of the last day of tendering (Regulation 18(10)).

Two more rules to note. During the tendering period, you can’t withdraw shares you’ve tendered (Regulation 18(9)). And from three working days before tendering opens until it closes, the acquirer and persons acting in concert can’t buy or sell shares of the target in the market (the proviso to Regulation 18(6)).

Tendering itself goes through the stock exchange mechanism, which Regulation 18(6A) requires the acquirer to facilitate. In practice you place the tender through your broker, much like you would in a buyback.

How the escrow protects you

The escrow is the acquirer’s money on the table before you hand over a single share. Regulation 17(1) sets the scale: 25% of the consideration on the first ₹500 crore, plus 10% of the balance consideration above that. If the offer is conditional on a minimum level of acceptance, the cash deposit has to be the higher of 100% of the consideration for that minimum level or 50% of the consideration payable under the whole offer.

If the buyer raises the price or the offer size later, Regulation 18(5) says the escrow has to be topped up before the revision is made. That’s a useful check when you read revised offer announcements.

Worked example: what actually gets accepted

Let’s take a made-up company, Sahyadri Pumps Ltd, with 10 crore shares outstanding. Every figure below is invented to show the calculation; it isn’t based on any real company or deal.

An acquirer already holds 8% and signs a deal to buy another 20% from the promoter at ₹410 a share. That would take the acquirer to 28%, crossing 25%, so Regulation 3(1) kicks in. The open offer must be for at least 26% of 10 crore shares, which is 2.6 crore shares.

Step 1: the price. Suppose the four relevant parameters come out like this:

The highest is ₹428, so that is the floor for the offer price. Notice the market VWAP beat the negotiated price here. That happens when the market has already priced in the deal or the stock has run up.

Step 2: the escrow. Total consideration is 2.6 crore shares × ₹428 = ₹1,112.8 crore. Escrow on the first ₹500 crore is 25%, which is ₹125 crore. On the balance of ₹612.8 crore it’s 10%, or ₹61.28 crore. Total escrow: ₹186.28 crore.

Step 3: acceptance. The stock has been trading around ₹390 in the weeks before tendering, well below ₹428, so plenty of shareholders want out. Say 5.2 crore shares are validly tendered against an offer size of 2.6 crore. The acceptance ratio is 2.6 ÷ 5.2 = 50%.

You tendered 400 shares. Using the proportionate formula from SEBI’s FAQ, 400 × (2.6 crore ÷ 5.2 crore) = 200 shares are accepted at ₹428, bringing in ₹85,600. The other 200 shares come back to your demat account.

Step 4: your real exit price. This is where people get caught. If the stock drifts to ₹380 once the offer closes, your 200 returned shares are worth ₹76,000. Your blended value across all 400 shares is (₹85,600 + ₹76,000) ÷ 400 = ₹404 a share, not ₹428. Still better than ₹380, but a long way from the headline price.

The offer price is the headline. Your blended exit, after proportionate acceptance, is the number that actually matters.

Should you tender? Questions we’d ask

There’s no right answer for everyone, but these are the questions that tend to decide it. The list is our own framework, not a SEBI checklist.

• Where is the market price versus the offer price? If the stock trades above the offer price through the tendering period, tendering means selling for less than you could get on the exchange.
• How much is likely to be tendered? If the free float is large and the offer is only 26%, assume partial acceptance and work out the blended price, as we did above.
• What did the independent directors say? The SEBI FAQ suggests reading the DPS, the letter of offer and the independent directors’ recommendations before tendering. All three are available on the SEBI website.
• Do you like the new owner? An open offer usually means a new controlling shareholder. If you’re bullish on what they’ll do with the business, staying invested is a perfectly reasonable choice.
• Is a delisting possible later? If the acquirer’s stake climbs high enough, a future delisting runs under different rules. Our guide to delisting of shares explains how the reverse book building price is set.

Open offer vs buyback vs delisting

All three involve someone offering to buy your shares, so they get muddled. The difference is who’s buying and why. In an open offer, a third party acquirer (or an existing big holder going past a threshold) buys from the public because the takeover code requires it. In a buyback, the company itself buys back its own shares, and our explainer on buyback of shares in India covers the tender and open market routes. In a delisting, the promoter is trying to take the company off the exchange altogether.

One habit that helps with all three: keep an eye on who holds what. Changes in promoter and institutional holding often show up in the quarterly shareholding pattern before a deal is announced, and our guide to shareholding pattern analysis shows how to read it.

Key takeaways

• Crossing 25% of voting rights, buying more than 5% in a financial year once above 25%, or acquiring control all trigger a mandatory open offer under the SAST Regulations.
• The minimum offer size is 26% of total shares, so oversubscribed offers are accepted proportionately.
• The offer price is the highest of several parameters, including the negotiated price and the 60-trading-day VWAP for frequently traded shares.
• Tendering lasts ten working days, tendered shares can’t be withdrawn, and payment is due within ten working days after tendering ends.
• Always work out your blended exit price, not just the headline offer price.

Disclaimer: This article is for educational purposes only and is not investment advice. The rules described are summarised from the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (consolidated text amended up to December 5, 2025) and SEBI’s FAQ on those regulations, both linked above and checked on October 21, 2026. Regulations change, so check the latest SEBI text and the offer documents before acting. Sahyadri Pumps Ltd and all its figures are made up to show the calculation. Investing in equities involves risk of loss. Please do your own research and consult a SEBI-registered investment adviser before making any investment decision.