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Can an open offer be allowed for less than six percent shareholders? Case against Sebi order reaches SAT

3A Capital Services has moved SAT against Sebi’s refusal to exclude non-selling promoters from its open offer in Sri Sarvaraya Sugars. Sebi has argued that once the 25 percent threshold is breached, an open offer to all eligible shareholders is mandatory.

October 10, 2025 / 16:38 IST
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3A Capital Services has moved SAT against Sebi’s refusal to exclude non-selling promoters from its open offer in Sri Sarvaraya Sugars. Sebi has argued that once the 25 percent threshold is breached, an open offer to all eligible shareholders is mandatory.

In a unique case, 3A Capital Services - an investment company - has approached the Securities Appellate Tribunal (SAT) against the capital market regulator Sebi's orders after it was denied from excluding shareholders unwilling to sell their stake in the target company during an open offer.

3A Capital Services said that since 65 percent of shareholders were not willing to part with their shares, and it had already acquired more than 25 percent stake in Sri Sarvaraya Sugars, the target company, hence the open offer should be limited to just 5.85 percent of the remaining shareholders. However, Sebi did not agree and said regulations do not allow for such an exemption, and 3A Capital Services was required to make an open offer.

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3A Capital Services’ counsel argued before the SAT that the company was required to make an open offer to remaining shareholders excluding those who acted in concert with the acquirer or the seller. Archana Prasad Kilaru, a promoter of Sri Sarvaraya Sugars, had sold her shares to 3A Capital while other promoter-shareholders - holding about 65 percent - were not desirous of selling their stake and had conveyed to Sebi through the merchant banker, and hence, 3A Capital contended that it was required to make an open offer only to the remaining 5.85 percent public shareholders.

Sebi disagreed with this view and submitted that the correspondence between the company, Sebi, and the merchant banker pertained to the stage when the acquirer held less than 25 percent stake. Once 3A Capital crossed the 25 percent threshold, it was duty-bound to make an open offer, and the promoter-shareholders holding 65 percent could not be excluded based on such correspondence. Sebi further argued that there was nothing on record to suggest that these promoter-shareholders would not accept the open offer.