The airline industry might be feeling relieved after a group of key ministers reached a consensus on allowing foreign airlines to buy up to 49 per cent in domestic carriers. However, the takeover regulations of the Securities and Exchange Board of India (Sebi) may act as a stumbling block. Last year, Sebi notified the Substantial Acquisition of Shares and Takeover Regulations, 2011, in which it specified that any entity acquiring 25 per cent or more in a company would have to mandatorily make an open offer of 26 per cent. That means, if a foreign firm were to pick 25 per cent or above in a domestic carrier, it would have to make an open offer of another 26 per cent. If the issue is fully subscribed, the foreign company may end up holding as much as 51 per cent or more — or a clear majority stake —in a domestic carrier. On the other hand, the government has capped the foreign direct investment (limit) to 49 per cent.
Source: Business Standard
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