How to tender shares in an open offer on Zerodha

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An open offer is a mandatory or voluntary offer made by an acquirer (and persons acting in concert) to the public shareholders of a listed target company, to purchase a minimum of 26% of the total shares outstanding. Open offers arise primarily in the context of takeovers and are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations), commonly called the Takeover Code.

Unlike a buyback (where the target company purchases its own shares), an open offer is made by an external acquirer seeking control of the company. Public shareholders who choose to exit may tender their shares to the acquirer at the announced open offer price. Participation is voluntary for public shareholders: those who do not tender continue to hold shares in the company (now with the new controlling shareholder).

Zerodha facilitates open offer tender orders through the exchange’s platform, for which it charges a corporate action order fee of Rs 20 plus GST.

Conflict-of-interest disclosure: WebNotes is an independent information publisher with no commercial arrangement with Zerodha.

Prerequisites

  • An active demat account with Zerodha at CDSL.
  • Shares of the target company held and settled in the Zerodha demat account on or before the tendering window opens.
  • Kite access to submit the tender order.
  • Review of the Letter of Offer published by the acquirer (available on SEBI’s website and the exchange’s corporate action disclosures).

Regulatory framework

SEBI SAST Regulations, 2011

Under the SAST Regulations, a mandatory open offer is triggered when:

  • An acquirer acquires shares or voting rights that, along with existing holdings, exceed 25% of the total shares/voting rights of the target company (the 25% trigger).
  • An acquirer who already holds between 25% and 75% acquires additional shares or voting rights exceeding 5% in any financial year (the creeping acquisition trigger).

The open offer must be for at least 26% of the total shares of the target company at a price that is the highest of:

  • The negotiated acquisition price.
  • The volume-weighted average market price (VWAMP) of the shares over the 60 trading days before the offer announcement.
  • The highest price paid by the acquirer for any acquisition in the 26 weeks before the public announcement.

A voluntary open offer may also be made under Regulation 6 of the SAST Regulations by an acquirer already holding more than 25% but less than 75%, seeking to acquire an additional 10% or more.

Exchange platform for open offers

SEBI mandated that open offers be settled through the exchange clearing platform (similar to tender offer buybacks), ensuring transparency, efficient settlement, and protection of shareholder funds through the clearing corporation’s guarantee.

Step-by-step: tendering shares in an open offer on Zerodha

Step 1: Identify the open offer

Open offer announcements are made through:

  • A Public Announcement (PA) in specified newspapers and on stock exchanges within the timelines set by SEBI.
  • A Detailed Public Statement (DPS) published typically within 5 working days of the PA.
  • A Letter of Offer dispatched to all shareholders of record.

Monitor NSE/BSE corporate action pages or SEBI’s SCORES platform for open offer announcements relating to your portfolio companies.

Step 2: Review the Letter of Offer

The Letter of Offer (LoF) discloses:

  • The open offer price.
  • The acquirer’s identity and background.
  • The offer period (tendering window), including opening and closing dates.
  • Settlement timeline (when payment will be made for accepted shares).
  • Escrow account details (confirming the acquirer has secured funds for the entire open offer consideration).

Review the LoF before tendering to assess whether the open offer price is fair relative to the market price and your cost of acquisition.

Step 3: Access the open offer section on Kite

  1. Log in to Kite at kite.zerodha.com.
  2. Navigate to “Corporate Actions” or check the dashboard for the open offer notification (visible only when the company in which you hold shares has an active open offer).
  3. Select the relevant open offer.

Step 4: Enter the quantity to tender

  1. The platform shows your eligible quantity (shares held in the demat account).
  2. Enter the number of shares you wish to tender. You may tender all or part of your eligible holding.
  3. Note: open offer tender orders may or may not be withdrawable; check the specific offer’s terms. Under the SAST Regulations, shareholders may withdraw their bids before the offer closes.

Step 5: Submit the tender order

  1. Review the order: share name, quantity, open offer price, and the Rs 20 plus GST Zerodha fee.
  2. Submit the order. Zerodha routes it to the exchange’s open offer platform.
  3. Tendered shares are blocked in your CDSL demat account during the offer period.
  4. Retain the confirmation number.

Step 6: Withdrawal (if permitted)

Under Regulation 18(9) of the SAST Regulations, shareholders may withdraw their tender during the offer period. The procedure for withdrawal on Kite (if applicable) is the same as the tender flow, but using the withdrawal option. Withdrawal closes at the same time as the offer period.

Step 7: Settlement

  • After the offer period closes, the acquirer (through the clearing corporation) accepts tendered shares on a pro-rata basis if the total tendered quantity exceeds 26% of total shares.
  • In practice, if the acquirer’s offer is for 26% and total tenders are less than 26%, all tendered shares are fully accepted.
  • Payment (accepted quantity × open offer price) is credited to your Zerodha trading account within the settlement cycle (typically T+5 to T+10 from the offer close date).
  • Unaccepted shares (in cases of oversubscription) are returned to your free holdings.

Open offer price vs market price

During the open offer period, the target company’s shares often trade near or above the open offer price (due to arbitrage activity). Shareholders should compare:

  • Market price: If higher than the open offer price, selling in the secondary market may be more profitable.
  • Open offer price: Fixed by the acquirer; may carry a premium over the pre-announcement price.
  • Acceptance ratio risk: If the offer is oversubscribed, only a portion of tendered shares will be accepted; the rest must be sold in the secondary market (which may be at a lower price if the open offer period is over and the arbitrage premium has evaporated).

What can go wrong

Offer period missed: Open offers have strict timelines set by SEBI. The tendering window is typically 10 working days. No extension is granted to individual shareholders who miss the deadline.

Tendered shares blocked: Shares submitted in the open offer are blocked and cannot be sold during the offer period. If the market price rises above the open offer price during this period, there is an opportunity cost.

Partial acceptance in oversubscribed offers: If the public float is large and the acquirer only requires 26%, more shareholders may tender than the acquirer needs. Pro-rata acceptance means only a portion of tendered shares are bought, and the remaining are returned after settlement.

Corporate action fee not refunded: The Rs 20 plus GST fee is charged for order placement and is not refunded if shares are partially or fully unaccepted.

Tax treatment

Open offer proceeds are taxed as capital gains in the hands of the tendering shareholder. From 1 October 2024, the same framework that applies to buybacks also applies here:

  • Sale consideration = open offer price per share accepted.
  • Cost of acquisition = original purchase price of the tendered shares.
  • Holding period = from original purchase date to the settlement/acceptance date of the open offer.

Capital gains tax:

  • STCG (held 12 months or less): 15% under Section 111A (STT is applicable on exchange-settled open offers).
  • LTCG (held more than 12 months): 10% on gains above Rs 1 lakh under Section 112A.

For shares acquired before 31 January 2018, the grandfathering rule may apply to the cost of acquisition for LTCG computation.

References

  1. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Regulations 3, 4, 6, 7, 8, 18.
  2. SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2018/011, open offer settlement through exchange platform.
  3. Income Tax Act, 1961, Sections 111A and 112A, capital gains on open offer tendering.
  4. Finance (No. 2) Act, 2024, capital gains framework applicable to exchange-settled corporate actions from 1 October 2024.
  5. NSE/BSE open offer platform operational guidelines.
  6. Zerodha support documentation, open offer tendering on Kite.

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The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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