SEBI's Open-Offer Override Power: Invoked Twice, Struck Down Once
Regulation 8(16) of the SAST Regulations lets SEBI discard an acquirer's own merchant banker's open-offer price and order an independent valuation instead. It reads like a dormant backstop. It is not dormant, and it is not settled. This piece covers the only two reported instances of its exercise, both against the same company, and what the second one is still being litigated over.
The Power Is Discretionary and Paid For by the Acquirer
Regulation 8(16) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 lets SEBI require, at the acquirer's expense, "valuation of the shares by an independent merchant banker other than the manager to the open offer or an independent chartered accountant in practice having a minimum experience of ten years."
The rationale given consistently in professional commentary is undervaluation risk on infrequently traded shares, where no reliable market price exists for the ordinary VWAP formula to defer to, and the acquirer's own merchant banker has every incentive to price low.
2019: The Price Was Revised Upward, and It Held
Tenneco's global acquisition of Federal-Mogul Holdings Corp. triggered an indirect open offer for the minority shareholders of Federal-Mogul Goetze (India) Ltd, an infrequently traded target.
SEBI appointed an independent valuer and directed the offer price revised upward from ₹400 to ₹608.46 per share. SAT dismissed Tenneco's appeal in November 2019, and the Supreme Court dismissed the related appeal that December, leaving the higher price to stand.
2023-24: The Same Company Again, and a Reversal
A second, separate open offer for the same company followed a later restructuring. Pegasus Holdings III, LLC offered ₹275 per share, revised to ₹295.65. By letter dated 30 August 2023, SEBI invoked Regulation 8(16) explicitly and appointed an independent chartered accountant, having found the acquirer's own valuation non-compliant.
SAT stayed the direction the following month, and in December 2024 its final order set aside SEBI's appointment of the valuer, holding that SEBI had incorrectly applied Regulation 8(16) to the case. SEBI has appealed. The Supreme Court issued notice to Pegasus in March 2025, and the matter remains pending.
What This Means in Practice
For an acquirer, price an infrequently traded target as though the power will be used, because a merchant banker's valuation that SEBI is prepared to distrust is the whole trigger, and the 2019 outcome was a 52 per cent increase upheld to the Supreme Court. For a minority shareholder, the power is real but it is not a remedy to rely on: it has been exercised twice on the public record, both times against one company.
Read the narrow fact pattern as the lesson. It takes an infrequently traded target, a valuation SEBI will actively contest, and an acquirer willing to litigate through two further forums after losing at the first.
The power is live. Its boundaries are not settled. The Supreme Court has yet to say which reading is right.