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Ministry defends Rs 2,000-cr threshold for M&A scrutiny

Similarly, in the pharma sector between 2017-21, just seven cases had a deal value of $ 250 million or above of which four were notified. In real estate, there was just one case where the deal value was over $250 million in the time period.

Ministry defends Rs 2,000-cr threshold for M&A scrutiny
The monetary threshold of Rs 2,000 crore is an essential but not sufficient critieria to attract notification by the Competition Commission of India, unless it has any local nexus, it has said.

The ministry of corporate affairs has opined that the proposed Rs 2,000 crore threshold for deal value under the Competition (Amendment) Bill, 2022 will not affect most mergers and acquisition (M&A) transactions.

The monetary threshold of Rs 2,000 crore is an essential but not sufficient critieria to attract notification by the Competition Commission of India, unless it has any local nexus, it has said.

In its submission before the Parliamentary Standing Committee on Finance, the ministry has noted that such a combination will attract notification by the regulator only when both conditions, that is the deal value as well as the having substantial business operations in India, are met.

It has also pointed out that till now, such high value transactions have been few and far between in the country. Between 2017-21, only five digital market transactions which were not notified (though were not notifiable as per current provisions of the Act), had a deal value of over $250 million or around Rs 2,000 crore.

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Similarly, in the pharma sector between 2017-21, just seven cases had a deal value of $ 250 million or above of which four were notified. In real estate, there was just one case where the deal value was over $250 million in the time period.

Clarity on what would constitute material influence would be provided in Combination Regulations or guidance notes, the MCA has further said.

The submission is understood to have been placed before the Parliamentary Standing Committee on Finance on November 29, when it had called officials of MCA and Competition Commission of India to conclude their oral evidence on the Bill.

The Parliamentary Standing Committee is expected to submit its report on the Competition (Amendment) Bill, 2022 in the upcoming Winter session, which starts on December 7.

However, the committee is understood to be finalising its report and it may stay with the Rs 2,000 crore but recommend a mechanism to ensure that all spell out the exclusions or mechanism for there is a view that it may suggest a separate mechanism for inflation indexation for the deal threshold.

There are also views that the threshold should not be included in the Act but notified separately for different segments.

“The Committee will finalise its report now taking in consideration all these views,” said a source.

A key provision in the Competition (Amendment) Bill, which was tabled in Parliament in the Monsoon Session, seeks to make it mandatory for high value mergers and acquisitions to be notified to the CCI if the deal value is over Rs 2,000 crore and it has significance presence in India. The provision is expected to capture high value M&A deals in the digital space.

Another amendment seeks to lower the time limit for approval of combinations to 150 days from the current 210 days. The MCA is understood to have submitted that this will ensure faster approvals and has also highlighted that most of its approvals come well before the 210 day deadline.

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First published on: 01-12-2022 at 02:15:00 am