🤝 Mergers, open offers, demergers and delistings: what happens to your shares

🎯 In 30 seconds: A corporate action is anything a company does that changes the shares you hold. In India the big ones are schemes of arrangement (mergers and demergers approved by the NCLT), open offers under SEBI's takeover rules, buybacks, and delistings. Some happen to you automatically. Others need you to tender shares through your broker by a deadline. In a merger your shares are swapped at a fixed swap ratio. In an open offer or buyback only part of what you tender may be accepted. In a demerger you get shares of a new company and must split your original cost between the two. Read the notice, know the dates, and know what happens if you do nothing.

Automatic and voluntary actions

Think of a chai stall owner who also runs a snacks counter. One year she merges with the stall next door; another year she spins the snacks counter off as a separate shop. Her regular customers did nothing, yet what they deal with changed. Shareholders are in the same position.

• Automatic (mandatory): happens to every holder the same way. A merger or demerger sanctioned by the NCLT, a bonus issue, a split. Your demat account changes after the record date. You do nothing.
• Voluntary: you choose. Tendering into an open offer, a buyback or a delisting offer, or applying in a rights issue. If you do nothing, nothing happens, and that can cost you.

Tender offers in India run through the stock exchange mechanism: you place a tender instruction through your broker during the tendering window, the shares are blocked in your demat, and settlement happens through the clearing corporation. Brokers often close their own window a little before the official one. The date in your broker's notice is the one that counts for you.

Bonus issues, splits and dividends are covered in Dividends, bonus issues, splits and buybacks. This chapter covers the bigger changes.

Mergers and demergers: the NCLT scheme route

Most Indian mergers, amalgamations and demergers are done as a scheme of arrangement under Sections 230 to 232 of the Companies Act, 2013, sanctioned by the National Company Law Tribunal (NCLT). For a listed company the path looks like this:

1. Board approval. The boards approve the scheme and a swap ratio (also called the share exchange ratio), backed by a valuation report. The company discloses it under Regulation 30 of the LODR rules.
2. Exchange no-objection. Before going to the NCLT, the listed company must file the draft scheme with the exchanges and get their no-objection letter (Regulation 37). The letter is valid for six months.
3. Shareholder and creditor approval. The NCLT orders meetings of shareholders and creditors, usually with remote e-voting. You get a notice with the scheme, the valuation report and the fairness opinion.
4. NCLT sanction. The tribunal hears objections and sanctions the scheme. Only then is it binding.
5. Record date and credit. The company fixes a record date. New shares of the merged or resulting company are credited to your demat. If the old company merges in, its shares stop trading.

The whole process often takes many months, sometimes more than a year. The exchange pages under Corporate Filings, Scheme Document, hold the documents.

Swap ratios and the deal spread

Say hypothetical Kapoor Logistics Ltd is merging into Mehta Freight Ltd at a swap ratio of 3 Mehta shares for every 5 Kapoor shares. Mehta trades at ₹250.

The gap between the deal value and the market price is the deal spread. You can back out the chance the market assigns to completion. Call it p. At a fair price, ₹10 × p = ₹30 × (1 − p), so p = 30 ÷ (10 + 30) = 75%.

Two things are different from a cash deal. First, the deal value moves with Mehta's share price. If Mehta falls to ₹220, each Kapoor share is worth 3 ÷ 5 × ₹220 = ₹132, and the "spread" can turn negative. Second, after the record date you become a Mehta shareholder, so read Mehta's numbers too.

The payoff shape is a small likely gain against a large less likely loss, the same shape as selling insurance. Compare it with the maths in Risk/reward and expectancy.

Takeovers and open offers

SEBI's Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011 protect public shareholders when control changes hands. The key triggers, as amended up to 5 December 2025:

• Crossing 25%. Anyone who, alone or with persons acting in concert, would come to hold 25% or more of the voting rights must make a public announcement of an open offer to the other shareholders.
• Creeping acquisition. Someone already holding 25% or more, but below the maximum allowed non-public holding (generally 75%, because of the 25% minimum public shareholding rule), can add up to 5% of the voting rights in a financial year without an open offer. More than that triggers one.
• Acquiring control in any other way, whatever the percentage, also triggers an open offer.

The open offer must be for at least 26% of the company's total shares. The price cannot be lower than the highest of several benchmarks, including the highest negotiated price paid to the seller, the highest price the acquirer paid in the previous 26 weeks, the volume-weighted average price it paid in the previous 52 weeks, and the volume-weighted average market price of the 60 trading days before the announcement (if the shares are frequently traded). The tendering period lasts 10 working days, and the acquirer must pay within 10 working days after it closes. Once you tender in an open offer you cannot withdraw during the tendering period.

Worked example. A buyer agrees to purchase 30% of hypothetical Gupta Textiles Ltd from its old promoter at ₹200 a share. The 60-day average market price is ₹180 and the buyer paid no more than ₹190 for any shares in the past 26 weeks, so the offer price is ₹200. The public holds 50% of the shares, and the offer is for 26%.

When more shares are tendered than the offer size, acceptance is scaled down in proportion, and the letter of offer explains the exact method. Plan for partial acceptance. The returned shares often trade below the offer price once the window closes, because the extra buyer is gone.

Buybacks: the acceptance ratio

A company can buy back its own shares. In a tender offer buyback it offers a fixed price, usually above the market, to all holders as of a record date, in proportion to their holdings. Under the Buy-back Regulations, 15% of the shares to be bought back (or the small shareholders' entitlement, if higher) is reserved for small shareholders: those whose holding is worth no more than ₹2 lakh at the record date closing price.

Worked example. Hypothetical Iyer Chemicals Ltd buys back 20 lakh shares at ₹500.

The smaller pool of small shareholders is why buyback acceptance ratios for them are usually much better than for large holders. The exact ratio is known only after the offer closes.

The open market buyback route through the stock exchange was phased down and then barred from 1 April 2025. A 2026 amendment to the Buy-back Regulations allows it again from 1 August 2026, limited to less than 15% of paid-up capital and free reserves. In an open market buyback the company buys on the exchange at market prices, so there is no acceptance ratio to calculate and no premium to capture.

Tax on buybacks changed twice in two years. From 1 October 2024 the whole buyback amount was taxed as a deemed dividend in the shareholder's hands. The Budget 2026 speech proposed taxing it as capital gains instead, with a higher effective rate for promoters. Check how the rules apply to the year of your buyback in Taxes for traders and investors, and with a CA.

Demergers and your cost

In a demerger, a company transfers one of its businesses to a separate company (the resulting company), which issues its shares to the parent's shareholders. You end up owning two listed stocks instead of one. The new company's shares can take some weeks after the record date to be listed, and you cannot sell them until then.

Your cost does not go up. Indian tax law splits your original cost between the two, in the proportion that the net book value of the assets transferred bears to the net worth of the parent just before the demerger. The holding period of the new shares counts from when you bought the original ones. Companies publish the percentage in a notice filed with the exchanges after the scheme takes effect.

Example. You bought 100 shares of hypothetical Parent Co at ₹400, for ₹40,000. The scheme gives 1 Spinco share for every Parent share, and the company's notice says 30% of the cost goes to Spinco.

Brokers' P&L reports do not always update the cost correctly after a demerger, especially if you moved brokers. Check it, or you may report the wrong gain.

Delisting: when the shares leave the exchange

A voluntary delisting happens when the promoter wants to take the company private. Under the Delisting Regulations, 2021 (amended up to 3 September 2025), the promoter must give public shareholders an exit, through one of two routes:

• Reverse book building. Public shareholders bid the price at which they are willing to sell, at or above a floor price. The floor is the highest of the acquirer's 52-week average purchase price, its highest price in 26 weeks, the 60-trading-day average market price (for frequently traded shares), and an adjusted book value set by a registered valuer. The discovered price is the price at which the promoter's holding would reach 90% of the shares. The promoter may accept it or reject it.
• Fixed price. Added in 2024 for frequently traded shares. The promoter offers a fixed price at least 15% above the floor price. The delisting succeeds if the promoter's holding plus the shares tendered reaches 90%.

In the example above, if the promoter accepts ₹380, everyone whose bid is at or below ₹380 sells at ₹380, and bids above it are not accepted. If the promoter rejects the discovered price, it can make one counter offer, but only if its holding plus the shares tendered is at least 75% and at least half the public shareholding was tendered. The counter offer must be at least the higher of the volume-weighted average of the bids received and any indicative price the promoter announced. A fixed price offer in the same case would have had to be at least ₹345 if the floor was ₹300.

After a successful delisting, shareholders who did not tender, or whose bids were not accepted, can still sell to the promoter at the same exit price for at least one year. After that, you hold unlisted shares that are hard to sell.

Compulsory delisting is different. An exchange can delist a company as a penalty, for example for long non-compliance, through a panel that includes a public representative and an investor association member. An independent valuer then sets a fair value, and the promoters must buy shares from public holders who want to sell, at that value, within three months. The company, its whole-time directors, its promoters and the companies they promote are barred from the securities market for ten years. The fair value can be low, and you are relying on the promoters of a company that was delisted for breaking the rules to pay it. Treat the risk of a persistently non-compliant company being delisted as real.

Try it

On NSE's Corporate Filings pages, find one recent scheme of arrangement and one recent open offer or buyback. For the scheme, open the scheme document and note the swap ratio, the record date and the valuation report's method. Compute the deal value and the spread using the two companies' closing prices, as in the Kapoor example, and record it weekly in a notebook until the NCLT sanction or a failure. For the open offer or buyback, find the letter of offer, note the price and size, and after it closes look up the final acceptance ratio the company announces. Compare it with what you would have guessed.

Sources

• SEBI: Substantial Acquisition of Shares and Takeovers Regulations, 2011 (amended up to 5 December 2025)
• SEBI: Delisting of Equity Shares Regulations, 2021 (amended up to 3 September 2025)
• SEBI: Buy-back of Securities Regulations, 2018 (amended up to 6 July 2026)
• SEBI: LODR Regulations, 2015, Regulation 37 (schemes of arrangement)
• Government of India: Budget 2026-27 speech, rationalisation of share buyback taxation
• NSE archive: example of a demerger cost-of-acquisition notice to shareholders (November 2025)
• NSE: Corporate Filings, Scheme Document
• NSE: Corporate Filings, Offer Documents