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An open offer to buy public shares, once made, is like letting a genie out of the lamp – it cannot be reversed. The Indian stock market has become a significant player on the global stage with a high growth rate and increased investor participation possible. The Indian public market and M&A space in public listed companies seem central in the evolving investment landscape. Despite global uncertainties, the number of deals (that trigger an open offer) being attempted in the public market in the first quarter of 2025 has exceeded the number of deals made last year during the same period.

In the age of instant gratification, share trading has become only a click away on a handheld device. Although any ordinary person can easily trade in listed shares, acquisition of a significant stake requires caution and commitment. Any person wishing to acquire control of a listed company of 25% or more of its voting rights is required to make an open offer to the public shareholders at a regulated price.

The Indian regulation governing open offers, commonly called the takeover code, allows for the withdrawal of an open offer in certain prescribed circumstances including if in the Securities and Exchange Board of 含羞草社区 (SEBI) opinion the circumstances merit withdrawal.

In general, not just the SEBI, but regulators across jurisdictions take a measured approach to the withdrawal proposals of an open offer. Legislators and regulators must walk the tightrope of protecting against market volatility while not frustrating economic interests.

The takeover code mentioned “impossibility” as a requirement for an acquirer to walk away from an open offer. Although the word “impossibility” has been dropped in the current takeover code, due to the Supreme Court interpretation, under the current law, once an open offer is made, it cannot be withdrawn unless there are circumstances in the realm of impossibility.

If the door of withdrawal of an offer is left ajar, deep-pocketed acquirers could use it to drop deals for better opportunities or indulge in share price manipulation. On the other hand, if the door is shut, there is no recourse for an acquirer who is significantly impacted (due to unforeseeable circumstances such as destruction of material assets, discovery of embezzlement or disruption of supply) other than to seek indemnification or damages.

The acquirer’s options are limited come hell or high water. Given the practical limitations of due diligence and the long wait for getting relief in claims for indemnity or damages in an Indian court, the acquisition ambitions in the Indian public market may get unduly thwarted, particularly for any kind of hostile takeovers.

This begs the question – should there be some room for the SEBI to exercise its discretion in cases not amounting to impossibility?

With the geopolitical situation today, impossibility may prove to be too harsh a threshold to impose. As India looks to compete in global deal activity tables, acquirer confidence may be boosted by a tweak in approach: guidance could be offered on what could help justify withdrawal in non-impossible scenarios. This would at least help acquirers negotiate walkaway rights that have a better chance of being enforced. In contrast, sellers today have a limited need for deal protection measures as acquirers are pretty much locked in once the public announcement has been made.

There is also the point of disclosure to consider. As public investors are becoming more sophisticated, it can be considered fair game for an acquirer to withdraw when its grounds of withdrawal were fully and adequately disclosed to the selling shareholders.

As with most things, the challenge is to find a fine balance.

Roopal Kulsrestha and Meghna Nachappa are partners at Shardul Amarchand Mangaldas & Co