Revising the merger control regime in India, the Ministry of Corporate Affairs on September 10 implemented certain provisions of the Competition Act, 2002 and Competition (Amendment) Act, 2023, and the Competition Commission of India (Combinations) Regulations, 2024. This action introduces the concept of a deal value threshold (DVT) in mergers, establishing criteria that determine whether prior approval of the Competition Commission of India (CCI) will be required.
DEAL VALUE THRESHOLD
DVT requires the prior approval of CCI for a transaction with a value (including direct, indirect, immediate, and deferred consideration) exceeding INR 2,000 crore (approximately $238 million) where the target has “substantial business operations” in India. CCI approval is required even in cases where the transaction would fall within the de minimis exemption.
A target is considered to have substantial business operations in India if it meets any of the following thresholds:
- For all sectors other than the digital sector, the gross merchandise value (GMV) of the target in India (1) exceeds 10% of the total global GMV for the 12-month period preceding the date of the definitive documents of the transaction and (2) is more than INR 500 crore (approximately $60 million). For the digital sector, the GMV exceeds 10% of the total global GMV for the 12-month period preceding the date of the definitive documents of the transaction.
- For all sectors other than the digital sector, the target’s turnover in India from all products and services in the financial year preceding the transaction (1) exceeds 10% of its global turnover derived from all products or services, and (2) is more than INR 500 crore (approximately $60 million). For the digital sector, the target’s turnover exceeds 10% of its global turnover derived from all products or services.
- For the digital sector, the number of business users or end users in India is 10% or more of the target’s total global business users or end users.
De minimis exemption is an exemption from obtaining CCI approval for targets with turnover of less than INR 1250 crores (approximately $149 million) or with assets in India less than INR 450 crores (approximately 454 million) in the financial year preceding the transaction.
We expect companies looking to acquire targets in India to face higher regulatory scrutiny. The applicability of the newly introduced rules to companies, particularly companies in the digital space, are yet to be tested and could present challenges.
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