By Shriram Subramaniam
In India’s dynamic corporate landscape, mergers, demergers, acquisitions, schemes of arrangement, de-listings, and bankruptcies are critical levers for growth, efficiency, and stakeholder value creation. While the process-board approval, shareholder and debt holder consents, and regulatory clearances-appears straightforward, the reality is often far more complex, with regulatory delays posing significant risks to transaction values and business certainty.
Timeliness is not just a procedural concern; it is central to the success of corporate transactions. Delays can erode shareholder value, create uncertainty for employees and business partners, and result in missed opportunities. Asset quality deterioration has been a concern in Insolvency and Bankruptcy Code (IBC) cases. In mergers and acquisitions, the business environment changes and stock prices move rapidly. Protracted regulatory approval processes can undermine the very benefits these transactions are designed to deliver.
There are some key authorities in the regulatory landscape which should be considered before moving forward. First, Reserve Bank of India (RBI) approval is crucial for transactions with cross-border elements, foreign investment, or those involving banks and non-banking financial companies. Its oversight ensures compliance with foreign exchange and sectoral regulations, but can add weeks or months to timelines, especially as regulatory scrutiny has increased in recent years.
Second, Competition Commission of India (CCI) reviews mergers, acquisitions, and combinations to prevent anti-competitive outcomes. Transactions above certain thresholds require CCI clearance, which can take up to 210 days for complex cases, though recent reforms aim to reduce this to 150 days. The “Green Channel” mechanism now allows for automatic approval of low-risk combinations, but most deals still face lengthy reviews, especially if market dominance is a concern.
Third, Securities and Exchange Board of India (Sebi) regulates all M&A, delisting, and schemes of arrangement involving listed companies. Its remit is to ensure transparency, minority shareholder protection, and fair market practices. Sebi’s proposed delisting regime, such as the introduction of fixed price delisting, is designed to streamline processes, but significant delays still occur in approvals for all transactions.
Finally, National Company Law Tribunal (NCLT) is the main adjudicating authority for approving schemes of arrangement, mergers, demergers, and corporate restructurings under the Companies Act, 2013. The process involves stakeholder meetings, hearings, and addressing objections, with appeals possible to the National Company Law Appellate Tribunal (NCLAT)-often extending timelines, especially in contested cases.
Several high-profile transactions illustrate the potential and the pitfalls of India’s regulatory environment. For instance, Vedanta’s ongoing demerger, Jet Airways’ failed Etihad investment, the protracted Vodafone-Idea merger, and the lengthy ICICI Securities delisting all faced significant regulatory hurdles despite strong stakeholder support. These cases demonstrate how delays in approvals can erode value, create uncertainty, and sometimes undermine the very objectives of the transaction, underscoring the need for greater regulatory agility and streamlined processes.
Delays in regulatory clearances can erode shareholder value due to market uncertainty and falling stock prices; cause loss of strategic opportunities to faster-moving competitors; create uncertainty for employees and business partners; and increase costs due to extended legal, regulatory, and administrative processes. Union Finance Minister Nirmala Sitharaman recently highlighted that such delays are closely watched by global investors and can affect India’s position in international negotiations, underscoring the need for regulatory agility.
Regulators have recognised these challenges. The CCI’s Green Channel and Sebi’s streamlined delisting regime are steps in the right direction. The ministry of corporate affairs is also working to simplify rules and enable fast-track M&As for low-risk transactions. However, balancing robust oversight with timely execution remains crucial. Companies, regulators, and stakeholders must collaborate to ensure that value-creating transactions are executed efficiently, with robust safeguards but without unnecessary delay. Only then can India’s corporate sector realise its full potential, delivering value to shareholders, fostering innovation, and driving economic growth. Time is of the essence.
The writer is founder and MD, InGovern Research Services.
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