New CCI Vetting Rules for M&A Deals

The Centre has raised the bar for mergers and acquisitions (M&A) that require prior approval from the Competition Commission of India (CCI). The new thresholds are based on the assets and turnover of the target entity, as well as the deal value of the transaction. The move is aimed at easing the regulatory burden on businesses and facilitating M&A activity in India.

The Corporate Affairs Ministry (MCA) issued two notifications on March 10, 2024, revising the ‘de-minimis’ or small target exemption threshold and the ‘jurisdictional’ threshold for notifying the CCI of M&A deals. The de-minimis threshold exempts transactions where the target entity has assets (including subsidiaries) of less than Rs 450 crore or a turnover of less than Rs 1,250 crore in India. The previous limits were Rs 350 crore for assets and Rs 1,000 crore for turnover.

The jurisdictional threshold triggers notification to and approval of the CCI if the combined assets or turnover of the parties exceed certain levels in India or globally. The MCA has increased these levels by 150 per cent from the 2016 levels, in line with the changes in the wholesale price index. The new thresholds are as follows:

• The combined assets of the parties exceed Rs 3,000 crore or the combined turnover exceeds Rs 9,000 crore in India; or
• The combined assets of the parties exceed $1.5 billion, including at least Rs 1,500 crore in India, or the combined turnover exceeds $4.5 billion, including at least Rs 4,500 crore in India; or
• The group to which the merged entity would belong has assets exceeding Rs 12,000 crore or turnover exceeding Rs 36,000 crore in India; or
• The group to which the merged entity would belong has assets exceeding $6 billion, including at least Rs 1,500 crore in India, or turnover exceeding $18 billion, including at least Rs 4,500 crore in India.

In addition to these asset/turnover-based thresholds, the MCA has also introduced a new deal value threshold (DVT) of Rs 2,000 crore for transactions where the target entity has substantial business operations in India. The DVT applies regardless of whether the target entity meets the de-minimis threshold or not. The MCA has defined substantial business operations as having either:

• At least 10 per cent of global users located in India; or
• At least 10 per cent of global gross merchandise value attributable to India; or
• At least 10 per cent of global turnover attributable to India.

The DVT is intended to capture transactions that may have a significant impact on competition in India, especially in digital markets where traditional asset/turnover metrics may not reflect the true value of a target entity.

The MCA has also relaxed some provisions for on-market transactions, such as acquisitions through open offers and stock exchange purchases. Such transactions can be notified to the CCI within 30 days of completion, instead of before consummation. Moreover, acquirers can benefit from economic advantages such as dividends or rights issues during the pendency of CCI approval, subject to certain conditions.

The MCA has also revised the fee structure for filing notices with the CCI, increasing it from Rs 15 lakh to Rs 25 lakh for Form I (short form) and from Rs 50 lakh to Rs 75 lakh for Form II (long form). The MCA has also simplified the filing procedure and modified some aspects of the notice formats.

The revised thresholds and regulations are expected to reduce the number of transactions that require CCI approval and expedite the clearance process. This will benefit businesses that are looking to consolidate or expand their operations in India through M&A deals.

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