Myra Khanna – The author is a fifth-Year Law Student at Maharashtra National Law University, Mumbai
Introduction
In 2025, the Burman family’s open offer to acquire Religare Enterprises at ₹235 per share turned controversial. The IDC opposed the acquisition, stating that the Burmans were not “fit and proper” acquirers. But SEBI and subsequently the Supreme Court rejected these objections as unsubstantiated. The target’s board of directors (“Board”) was consequently ordered to comply, drawing media attention to the regulatory standoff.
This IDC report is particularly notable because of its observations. It was observed by the IDC that the offer price was 15% below Religare’s closing price in September 2023 (₹271) and 16% lower than its 60-day trading average (₹280). It also flagged that the Reserve Bank of India’s approval was subject to mandatory NBFC consolidation requirements by March 2026, and identified how the implications of this were not sufficiently addressed in the offer letter.
Although the Burman group’s takeover was successful, the Religare case is different because the IDC did not just perform formulaic price checks, but also considered the strategic and regulatory implications. The 2010 Takeover Regulations Advisory Committee (“TRAC”) originally envisioned IDCs taking “a more conscious position” and not “play[ing] a passive role,” so that minority shareholders are provided with genuine information for making exit decisions on fair terms. This was evident in Religare IDC’s approach, even though it could not prevent the transaction.
But this IDC is an outlier. The majority of IDCs are cautious and procedural; their recommendations merely verify adherence to SEBI pricing rules (VWAPs/Reg-8 floors) and steer clear of more in-depth discussion on strategic or regulatory risks. Why cannot all IDCs provide substantive analysis if one can? The regulations themselves might hold an answer.
Broad Mandate, Narrowly Implemented
Regulation 26(6)-(7) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Code”) requires target boards to form an IDC that issues “written reasoned recommendations” on open offers, published at least two days before the tendering period begins. TRAC even contemplated that IDCs, while evaluating offers, would engage “external advisers…merchant bankers, chartered accountants, and lawyers” at company expense. This embodies the tenet of Takeover Code, which is to provide minority shareholders a fair exit opportunity on terms no worse than those of the large shareholders. While determining whether to tender, shareholders must consider more than just whether the offer satisfies SEBI’s floor price. They must also consider the regulatory conditions, strategic intentions, and the true impact of the new management on their investments.
In actuality, though the IDC report format merely asks the IDCs to state if the offers are “fair and reasonable” and to summarise the reasons. Although opinions must be “reasoned,” the regulations provide no checklist that goes beyond pricing compliance. The definition of “reasoned recommendation” and other factors that must be considered have not been specified by SEBI. It is unclear if this is a flaw in SEBI’s own structure or a purposeful regulatory mechanism. Regardless of the intent, the practical consequence of such a broad mandate is the shareholders’ disconnect.
Shareholders’ Behaviour: The Disconnect in Practice
Shareholders do not treat the IDC recommendations as decisive. This is evident, as three scenarios usually unfold: (i) the IDC recommends the takeover and shareholders accept it, as in the cases of Orient Abrasives Ltd. and Dhanvarsha, or the IDC qualifies the takeover citing concerns and the offer fails (e.g. Alstom T&D reported failure), (ii) the IDC recommends the takeover, but shareholders reject it anyway (e.g., Suzlon Energy Ltd.’s failure); or (iii) the IDC issues a qualified (or negative) recommendation, but shareholders disregard it and proceed with the offer. Occasionally, however, IDC involvement leads to price revisions (e.g. Mangalore Chemicals).
These instances reflect that the IDC reports are not always the basis for shareholder decisions. The shareholders make their own decisions, regardless of whether the IDC recommends favourably or advises caution (e.g. Religare). Realistically, the IDC’s recommendation serves more as statutory compliance than as decision-relevant input. Additionally, the incentive for IDCs to go above and beyond is also inadequate if the shareholders give their recommendations little importance.
Why is the Incentive to Engage Substantively Absent
At least two structural features may help explain why IDCs often default to minimal analysis.
First, Independent directors (“ID”) are appointed by the Board under the Companies Act, 2013 (“Companies Act”) the Boards may themselves be influenced by promoters. While IDs meet technical independence criteria, they may lack sector-specific expertise, experience in mergers and acquisitions, or even incentives to question promoters on the terms of the offer. Second, IDs typically lack dedicated support staff, access to independent valuation experts, or even adequate time (as the recommendations must be published just two days before the offer closes). There is no mandatory requirement for independent and fair opinions, and recommendations are non-binding, reducing the perceived consequence of a perfunctory analysis. If shareholders often make independent decisions regardless of IDC input, the incentive to invest in deeper evaluation is correspondingly limited.
Demonstrated Capacity: IDC’s Scheme Assessment
These limitations, however, do not adequately explain the gap, because the same IDs, operating under a different regulatory mandate, do more. SEBI requires IDCs to assess schemes of arrangement. IDCs must confirm schemes are “not detrimental to shareholders” under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, after examining mandatory valuation reports from registered valuers, fairness opinions from SEBI-registered merchant bankers, and audit committee analyses of rationale and synergies, all subject to the National Company Law Tribunal’s (“NCLT”) approval.
The same IDs who issue brief takeover summaries conduct multidimensional analysis for schemes. Rather than capability, the difference appears to be regulatory mandate and accountability.
Admittedly, schemes operate under different regulatory architectures; under the Companies Act, the NCLT acts as the adjudicating authority, while under the Takeover Code, takeovers do not require the NCLT’s approval. Replicating such scheme-level rigour for takeovers would require adapting these mechanisms through SEBI guidance rather than the NCLT’s involvement. Yet, the notion remains: if IDCs can provide comprehensive assessments when mandated by such mechanisms, they could potentially do so for takeovers. There is capacity, but no regulatory framework to demand it. It appears, however, that some companies have recognised this gap and are working to close it.
The Corporate Workaround: When Companies Go Beyond the IDC
While facing multiple competing takeover offers, Fortis Healthcare, in addition to its statutory IDC, formed an advisory committee comprising valuation specialists, industry experts, and legal advisors. In the case of Fortis, though the IDC monitored the evaluation process and made recommendations, the advisory committee provided technical expertise for comparing competing offers. This hybrid approach was appropriate given the complexity of evaluating simultaneous offers.
Other companies, such as Sona Comstar, Quality Power, and Delhivery, have established mergers and acquisition committees, but these are designed for pre-transaction strategic review rather than for assessing unsolicited takeover offers.
In the Fortis model, different roles are maintained; expert committees are there to support the IDC, not replace it. Since IDs have a fiduciary duty towards minority shareholders, they need to be independent from the management and promoters. If such voluntary committees, thus, become the primary source of transaction analysis, the statutory safeguard for minorities is consequently diminished. No concerns have been raised about such committees publicly. But if voluntary committees and IDCs are to co-exist, their roles must remain distinct.
Conclusion
Companies like Fortis have adopted a corporate workaround which reflects a pragmatic realisation that the existing IDC framework does not require the kind of analysis that minority shareholders require. Granted, these voluntary structures allow for a more complete assessment. But not only do they risk rendering IDC recommendations a mere formality (which is already the case), but they also risk mitigating the substantive analysis to committees that may not be independent. SEBI, on the other hand, is better positioned to offer a more long-lasting solution. SEBI can do so by clarifying the substance of a “reasoned recommendation”. For instance, beyond pricing, the UK Takeover Panel prescribes a number of factors, including strategic rationale, regulatory conditions, acquirer’s stated plans, and alternatives, required to be assessed by the panel. Admittedly, India cannot replicate the UK Takeover Panel’s case-by-case monitoring mechanism, but codifying a similar checklist for IDC evaluation could serve the purpose. By simply making explicit what a meaningful recommendation already requires. But regardless of the constraints or limitations mentioned in this piece, the Religare IDC already demonstrates that such an analysis is possible within the existing regime as well. Such an analysis is not only feasible but also necessary for upholding the Takeover Code’s objective, which is to protect the minority shareholder.