INDIA: Move to Align India Takeover Code Threshold with India FDI Caps

Tuesday March 13 2012

The Securities and Exchange Board of India (SEBI) has reportedly refused to provide any special consideration to foreign investors regarding the India FDI caps of 26 and 49 percent which apply to acquisitions in certain sectors, such as a direct to home or private security company; Acquisitions of 25 percent in these sectors would fall foul of the new threshold in the India Takeovers Code and would as a result require an open offer to be made for an additional 26 percent, thereby breaching the India FDI cap.

The Indian government has therefore been pushed to find a way round the new India Takeover Code, whilst still complying with the FDI cap. Current government advice is reported to state that overseas investors seeking to acquire stakes in listed Indian companies operating in sectors where FDI is restricted at 26% or 49% will be advised to first acquire shares from the public through an open offer and then turn to promoters to buy additional shares. In recent weeks, however, there have been reports that some elements of the India Takeover Code will be reviewed.

This information will be updated when more details become available.