The Securities & Exchange Board of India (Sebi ) has ruled out any dilution in the Takeover Code, a move that will force the government to rework its plan to permit foreign airlines to acquire a 26% stake in Indian carriers. 

The government wanted Sebi to make a special exemption for civil aviation as acquisition of a stake that's 25% or more triggers an open offer from the acquirer to buy another 26% in the target company . In fact, an exemption from Sebi was being sought for all sectors following an anomaly that was pointed out by the department of industrial policy and promotion (DIPP). 

Although the finance ministry has not sent a formal proposal to the market regulator, a government official confirmed that discussions have taken place. Now DIPP, which is piloting the proposal, is waiting for word from both finance and civil aviation ministries on Sebi's stand before sending the proposal for Cabinet approval. 

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