The Ministry of Corporate Affairs on Friday increased the asset and turnover thresholds for mergers and acquisitions of firms that would require the approval of the antitrust regulator, sparing small deals from mandatory scrutiny and reducing the compliance burden.
According to a notification by the ministry, two domestic companies pursuing M&A plans will now have to seek the Competition Commission of India’s (CCI’s) clearance if their combined assets and annual turnover in India exceed ₹2,500 crore and ₹7,500 crore, respectively, compared with ₹2,000 crore and ₹6,000 crore earlier.
For those with overseas operations, regulatory clearance would be needed if the combined assets are in excess of $1.25 billion (with at least₹ 1,250 crore in India), against $1 billion (with ₹1,000 crore in India) earlier. The turnover thresholds are $3.75 billion globally and ₹3,750 crore in India, up 25% each from the earlier limits.
Two domestic groups involved in an M&A deal will have to seek the CCI approval if their combined assets and turnover are in excess of ₹10,000 crore and ₹30,000 crore, respectively, compared with the earlier thresholds of ₹8,000 crore and ₹24,000 crore.
For two foreign groups with India operations, the thresholds of combined assets and turnover have been raised to $5 five billion (with at least ₹1,250 crore in India) and $15 billion (₹3,750 crore in India), respectively, up 25% each from the earlier limits.
In a statement, the MCA called the revisions a step towards further “ease of doing business”.
According to another notification, if the target of an acquisition has assets of less than ₹450 crore or annual turnover of under ₹ 1,250 crore, the deal would be exempted from the CCI approval. The earlier limits for assets and turnover were ₹350 crore and ₹1,000 crore, respectively. This relief is for two years. The increase of thresholds is done periodically to account for changes in the wholesale price index and the exchange rate. The last revisions were made in 2016.
Shweta Shroff Chopra, partner at Shardul Amarchand Mangaldas & Co, said: “The revisions mark a shift towards a more business-friendly India.” Higher thresholds will “facilitate smoother M&A processes, making transactions more efficient by reducing the regulatory hurdles”, Chopra said.
Unnati Agrawal, partner at Induslaw, said: “This development may ease the regulatory burden on certain ongoing transactions as they may now avail of the benefit of the revised de minimis thresholds and be exempt from the requirement of obtaining prior approval of the CCI.”
