According to Sebi's present Substantial Acquisition of Shares and Takeovers Regulations, any foreign company that buys over 24.99% stake in an Indian firm has to go for an open offer for 26% (in case of airlines 24% as the sectoral cap for FDI is 49%).
Industry sources say Kingfisher chief Vijay Mallya has asked the market regulator and finance ministry to offer certain relaxations from this norm as it poses to be one of the biggest road blocks in the airline's plans to sell its stake.
Mallya is negotiating with Sebi and the finance ministry to work out the open offer issue. He is in advance talks with some investors in the UK and Dubai who have raised concerns over the open offer rule, a senior government official said on the condition of anonymity.
The domestic carriers had lobbied against this norm even before the government allowed foreign direct investment (FDI). However, the 49% FDI was permitted without any exemption.
Sources said that Mallya, even in his last meeting with the aviation secretary KN Srivastava, had assured that the airline has already taken up the matter to the finance ministry and Sebi to make an exemption for it and would soon have an investor. The company officials feel that the open-offer rule is one of the main reasons for delay in FDI. Though a company can approach Sebi to seek exemption from the rule, the matter is considered on a case-to-case basis.
Kingfisher recently announced its plans to cap investments by foreign institutional investors (FIIs) in the company at 3%.