TAKEOVER CODE: SEBI INTERPRETS ‘ACQUISITION’ AS TRADE DATE, NOT DEMAT CREDIT

Ideas.Com India Pvt. Ltd. (“Querist”), a promoter group entity of Pritish Nandy Communications Ltd. acquired 7,05,000 equity shares (4.87%) during March 26–28, 2025. In relation to the said trades, while the Querist made payment for the trades on the dates mentioned above, a significant portion of the shares (6,23,950) acquired on March 28, 2025, was credited to the Acquirer’s demat account only on April 2, 2025, (i.e., in the next financial year) due to intervening market holidays. As a result, these shares did not reflect in the BENPOS received by the listed entity as on March 31, 2025.

Pursuant to the above, the Querist had sought clarification as to whether the acquisition of shares credited to the demat account of Querist is to be considered: (i) as acquired in the financial year in which the trades were executed/ contracted; or (ii) the year in which delivery (credit to demat account of the Querist) was completed?

The query specifically sought for an interpretation of the term “acquisition” under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Code”) for the purpose of calculating the 5% threshold under Regulation 3 (2) therein. The query sought clarification to enable the Promoter Group to further acquire 5% of the shares of the listed entity under creeping acquisition during the financial year 2025-2026, if found appropriate.

In relation to the above query, SEBI issued an informal guidance dated 19.06.2025 bearing reference number SEBI/HO/CFD/PoD-1/OW/P/2025/16482/1 where it clarified as follows:

a. the terms “acquirer” and “acquisition” include ‘the agreement to acquire’, e., a prospective acquisition.

b. In case of market purchases, Regulation 13 (2) requires that the public announcement be made prior to placing a purchase order (for acquisition of shares that would take the entitlement to voting rights beyond the stipulated threshold of 25%), which indicates the regulatory emphasis on conveying intention of acquisition over delivery (being the completion of acquisition of shares or voting rights).

c. Therefore, for the purposes of Regulation 3 (2) read with Regulation 13, it is the act of placing the purchase order (i.e. intention to acquire) that is relevant, and not the date of credit of shares to the demat account.

Therefore, SEBI clarified that the “acquisition” by the Querist was to be considered as having been made in the financial year in which the trades were executed, i.e., FY 2024–25, irrespective of the date of credit to the demat account.

This informal guidance of SEBI is significant for promoter groups making acquisitions near the end of a financial year, particularly when market holidays cause delivery delays.