M&A overhaul: SEBI bats for level playing field for retail investors, says report

Domestic market regulator the Securities and Exchange Board of India (SEBI) is preparing to tighten its merger and acquisition (M&A) rulebook, aiming to bar acquiring entities from offering sweeteners, such as higher prices or additional compensation, to major stakeholders that are not available to the public, according to a report by Reuters.

Two sources with direct knowledge of the matter told Reuters that these reforms are designed to "level the playing field for smaller and retail investors and expedite deals." While SEBI Chairman Tuhin Kanta Pandey confirmed to reporters on Wednesday that the regulator is working to revamp the ‘takeover code’ and will seek public feedback, he did not disclose specific details.

The proposed plan appears to address regulatory gaps that have historically allowed select major shareholders to command premiums. The report highlighted the December 2022 Adani Group acquisition of a stake in New Delhi TV Ltd. In that instance, founders Radhika and Prannoy Roy were bought out at a "17% premium to the open-offer price made to minority shareholders," it said, adding that the transaction was executed just 18 days after the open offer.

To prevent such disparities, the new norms will reportedly forbid acquirers from negotiating separate deals with large shareholders for six months following an open offer.

Furthermore, to speed up corporate consolidation—which is seeing increased activity due to rising foreign investment in 2025—SEBI intends to slash the permitted time to complete an open offer to 30 days from the current two months.

The overhaul is comprehensive. The regulator is also reportedly evaluating "creeping acquisition" norms, which currently allow existing investors to hike stakes by 5% annually without triggering a mandatory open offer. Sources indicated that stricter global standards are prompting a review of these thresholds.

Additionally, mandatory external valuations will be introduced "when large shareholders sell shares privately to select parties," ensuring transparency in private deal-making.