Introduction

The Securities and Exchange Board of India (SEBI) has notified the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2025, bringing targeted changes to the valuation framework applicable to takeover transactions and open offers. These amendments address long-standing concerns around pricing opacity, especially in cases involving infrequently traded shares or non-cash consideration. By strengthening the role of independent valuation, SEBI has reinforced fairness, transparency, and investor protection in acquisition-related transactions.

1. Regulatory Background and Context

The SAST Regulations form the backbone of India’s takeover regime, ensuring equitable treatment of shareholders during substantial acquisitions. However, valuation challenges often arise where market prices do not reliably represent fair value—particularly in companies with thin trading volumes or illiquid scrips.

Recognising this gap, SEBI has introduced amendments that empower the regulator to mandate independent valuation in specified circumstances. The objective is to prevent price discovery distortions, curb opportunistic acquisitions, and enhance confidence among minority shareholders.

2. Independent Valuation of Infrequently Traded Shares

A key feature of the 2025 amendment is the explicit power granted to SEBI to require valuation of infrequently traded shares.

When Is Independent Valuation Triggered?

SEBI may direct a valuation exercise where:

1. The shares proposed to be acquired or transferred fail to meet prescribed liquidity benchmarks; and
2. The prevailing market price is unlikely to reflect fair value due to limited, sporadic, or non-representative trading activity.

Key Regulatory Features

1. The valuation shall be carried out at the cost of the acquirer.
2. The exercise must be conducted by an independent registered valuer.

This safeguard ensures that offer prices are not artificially influenced by low volumes or short-term price movements, thereby protecting minority shareholders from undervaluation risks.

3. Valuation of Listed Securities Offered as Consideration

The amendments also address scenarios where the acquirer offers listed securities as consideration instead of cash—an increasingly common structure in strategic acquisitions and group reorganisations.

Revised Valuation Requirement

1. The value of listed securities offered as consideration must be certified by an independent registered valuer.
2. The certification must confirm that the quoted market price represents a genuine and reliable measure of fair value.

This provision mitigates risks arising from price manipulation, temporary volatility, low public float, or abnormal trading patterns, ensuring parity between cash and non-cash consideration structures.

4. Introduction of the Definition of “Valuer” under Regulation 2

To remove ambiguity and enhance standardisation, SEBI has formally introduced a definition of “valuer” under Regulation 2 of the SAST Regulations.

Regulatory Significance

1. Clarifies that all valuations mandated under the Takeover Regulations must be performed by an independent registered valuer.

2. Reinforces professional accountability, independence, and adherence to recognised valuation standards.

3. Enhances the credibility of valuation reports relied upon in open offers and acquisition pricing.

This definitional clarity aligns takeover-related valuations with broader regulatory expectations under India’s valuation and corporate governance framework.

5. Regulatory Intent and Market Impact

The 2025 amendments reflect SEBI’s clear intent to elevate governance standards in takeover transactions. Collectively, the changes strengthen:

1. Fair price discovery for minority and public shareholders;
2. Transparency and integrity in valuation methodologies;
3. Investor protection in complex acquisition structures involving illiquid shares or non-cash consideration; and
4. Compliance discipline for acquirers structuring open offers, strategic stake purchases, mergers, and indirect acquisitions.

From a practical standpoint, acquirers and advisors must now factor in valuation timelines, costs, and enhanced scrutiny while structuring transactions under the SAST Regulations.

Conclusion

SEBI’s amendment to the SAST Regulations marks a decisive step toward strengthening the valuation ecosystem in India’s takeover regime. By mandating independent valuation in cases of pricing ambiguity and formally recognising the role of registered valuers, the regulator has reinforced fairness, transparency, and confidence in the market. For investors, especially minority shareholders, these changes provide a stronger assurance that acquisition prices will reflect true economic value rather than distorted market signals.

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