New Delhi: Days before the Competition Commission of India (CCI) starts scrutinizing mergers and acquisitions (M&As) above a certain deal value, the ministry of corporate affairs (MCA) has said that only global mergers involving companies with a significant presence in India will require its approval.
MCA issued the clarification on 27 May. It will start monitoring and regulating M&As from 1 June.
Only global mergers where the company being acquired is present in India and has revenue of at least Rs 750 crore and an asset base of at least Rs 250 crore would need to be approved by CCI, said chairman Dhanendra Kumar.
The ministry’s March notification defining threshold limits in terms of assets and revenue had not qualified whether these numbers referred to the target company’s global assets or turnover or just those in India.
The lack of clarity led to significant confusion among multinational companies and corporate lawyers.
Kumar said the idea is to exempt companies that have no significant presence in India and, therefore, cannot be seen as adversely affecting competition in the country.
“This is a welcome development for global mergers particularly and will keep many global mergers, which would not have any bearing on the Indian market, out of the ambit of merger notification requirements,” said Samir Gandhi, partner at Economic Laws Practice.
A global merger is one involving two global companies or an Indian firm and a global one.
Vinod Dhall, former acting chairman of CCI, said the clarification is a step in the right direction just before it starts taking up M&As.
“This is a timely correction as it appears the words ‘in India’ were inadvertently missed by MCA, which sent wrong signals to companies and corporate lawyers,” he added.
Dhall further clarified that the companies would have to exceed both thresholds to fall under the ambit of the norms.
“For instance, if the target company’s asset base is Rs 200 crore (against the prescribed Rs 250 crore), but revenue is Rs 2,000 crore (much above the threshold), the M&A will still be exempt” from requiring approval, he said.
While Dhall said the clarification would allay concerns, Kumar said Indian companies acquiring firms in other countries will benefit because they will not have to seek CCI’s approval if the target has no presence, or only a small one, in India.
In a joint representation by industry lobbies Federation of Indian Chambers of Commerce and Industry and the Confederation of Indian Industry in April, Vijaya Sampath, group general counsel at Bharti Enterprises Ltd, said Indian companies acquiring firms overseas would end up having to cross too many regulatory hurdles, including CCI approval, even if they acquired a small company.
Sampath was not available for comment on the clarification.