The open offer made by Japanese telecom major DoCoMo and Tata Sons for Tata Teleservices [Get Quote] (Maharashtra) has run into rough weather.

The Securities and Exchange Board of India has questioned the open offer price and has asked the companies to increase it in line with the valuation of another Tata group firm, Tata Teleservices, which owns 37.5 per cent stake in TTML.

DoCoMo , which has acquired 26 per cent stake in Tata Teleservices for Rs 13,070 crore (Rs 130.7 billion), in November 2008 had given an open offer to acquire 20 per cent stake of TTML at Rs 24.70 per share. Since it was an indirect acquisition, the offer price of Rs 24.70 per share was based on the average of the last six months share price in accordance with the Sebi regulation.

The regulator is believed to have said that since both the companies are operating in India and are engaged in the same vertical, the valuation for indirect acquisition should also be the same as direct acquisition.

At the acquisition cost of Rs 13,070 crore, TTSL, which has a subscriber base of 25 million in 20 circles, was valued at Rs 50,269 crore (Rs 502.69 billion). In effect, DoCoMo paid Rs 20,107 per subscriber to acquire the stake.

On the other hand, the offer price of Rs 24.70 values TTSL, which has a subscriber base of five million, at Rs 4,700 crore, or per subscriber valuation of around Rs 9,200 per subscriber. This is much below the acquisition cost of the holding company, sources said.

When contacted, a senior official of Lazard India Private Ltd decline to comment.  "We are awaiting Sebi's approval," he added. Lazard India is advising the acquirer and is the merchant banker for the open offer.

In case of indirect acquisitions, when an open offer is triggered by the acquisition of the holding company which may be operating in India or in an overseas country, the offer price of such company (acquired indirectly) shall be determined with reference to the date of the public announcement for the holding company as the negotiated price for the holding company is not applicable in this case, officials involved in the transaction said.

The open offer has already been deferred following a delay in approval from the market regulator. The open offer by DoCoMo along with Tata Sons, was scheduled to begin on January 8 and close on January 27 next year.

DoCoMo said the Rs 949 crore (Rs 9.49 billion) open offer for a 20 per cent stake in the firm has been postponed, "till further notice in this regard is published by the Manager to the Offer". The open offer was scheduled to begin on January 8 and close on January 27 this year.