FIIs, PEs exempt from seeking CCI nod for investment

Investments by private equities (PEs) and foreign institutional investors (FIIs) will be kept out of the purview of merger and acquisition (M&A) regulations notified by the competition watchdog CCI.

According to sources, the mergers and acquisitions provisions are aimed at ensuring fair competition and will not cover institutional investment in companies.

The Competition Commission of India's (CCI) regulation notified yesterday requires a company to seek its prior approval for merger in case the asset and turnover of the merged entity exceed Rs 1,500 crore and Rs 4,500 crore, respectively with effect from June 1.

The competition watchdog has also given liberty to the financial institutions to inform it within seven days of the acquisition.

"Financial institutions will have to file a separate Form III post acquisition within prescribed time limit," Amarchand Mangaldas Principal Associate Shweta Shroff Chopra said.

The financial institutions have been given this liberty as it also falls under the domain of other regulators.

Sources said the investment by PE and FIIs has been kept out of the purview of the CCI regulations since they are mostly for a specified period of year and does not generally hamper market competition.

Apprehending that there could be a regulatory overlap in enforcing the provisions of the CCI merger and acquisition norms, KPMG (India) M&A, Tax Prashant Kapoor said there is a need to align the Competition Act and Sebi legislations.

"There is a need for clarity on how both the legislations and their respective time periods would be worked in tandem for closing a deal and how the overlaps if any need to be dealt with," Kapoor said.

Also, if the market share of the merged entity exceeds 15%, the deal needs to get clearance from the anti-monopoly watchdog.

The CCI regulation said if an acquirer holds a 50% stake in a firm, then further acquisition will not require its approval, except in case where the acquisition leads to transfer of control.