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India to relax thresholds regarding mergers and acquisitions
November, 20th 2010

India proposes to relax thresholds regarding mergers and acquisitions (M&As) to be examined by the countrys anti-trust body and mandate tighter deadlines for approvals, corporate affairs minister Salman Khursheed said.

We will soon be placing the amendments to the competition law in Parliament and hope that these are passed either in this session or the coming (budget) session, Khursheed said on the sidelines of a seminar on Friday.

The minister added that provisions relating to prior approval of the Competition Commission of India (CCI) before any M&As above a certain size in terms of turnover or asset are executedwill be notified soon.

CCI was set up through an act of Parliament in 2007, and norms relating to the abuse of market dominance and the formation of cartels were notified last year. The commission has since started handling those cases.

Norms relating to M&As, however, havent yet been notified by the ministry largely because of extensive lobbying by industry, which says the process of clearing them will be time consuming and adversely affect the formation of combinations.

The ministry has gone through the details of the competition law and has come to the conclusion that amendments to it (Competition Act) have to be industry friendly. There are some issues such as that of target entity where a minimum threshold needs to be set up and through the amendment we are addressing these issues, Khursheed said.

After extensive corporate lobbying for a more liberal M&A environment that would limit the number of cases requiring CCI approval, the watchdog, through a draft regulation in 2008, revised the threshold limits of turnover and assets that will need CCIs prior approval.

According to the revised norms, a large firm will be able to acquire a smaller company with a turnover of up toRs.600 crore, or assets of up to Rs.200 crore, without needing CCIs prior approval even if the combined turnover of the two companies exceeds Rs.3,000 crore the previously defined limit for securing approval from the antitrust body.

In the case of Indian firms with an overseas presence, only those with revenue of at least Rs.6,000 crore (Rs.3,000 crore in the earlier rules) need to inform CCI before making an acquisition in India or elsewhere.

For conglomerates with a global presence, this limit becomes Rs.24,000 crore, doubled from Rs.12,000 crore earlier.

However, in both these cases, the entities will have to approach the commission for approval if the combined revenue of the Indian operations of the acquirer and the acquired are at least Rs.1,500 crore.

All these need to be introduced in the amendment, which Khursheed promises will happen soon.

We did try and make norms more industry friendly through the draft regulation two years back. The same will need to be done through amendments now, said Vinod Dhall of Dhall Law Chambers. Dhall is a former acting chairman of CCI.

CCI chairman Dhanendra Kumar said the watchdog is looking forward to the ministry notifying sections 5 and 6 of the competition law that deal with M&As.

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