Talks may trigger larger M&A policy debate

Irrespective of the success or failure of the merger plans of telecom major Bharti Airtel and its South African counterpart MTN, the approach of the South African government towards the proposed merger talks is about to trigger a bigger debate over the significance of protecting the domestic nature of business entities in India.

The move gains significance in the wake of increased merger and acquisition talks in key sectors like pharmaceuticals. This, civil society groups feel, could jeopardize Indian attempts to be self-reliant in the production of affordable life-saving medicines.

The Ministry of Corporate Affairs, which is readying a fresh set of rules related to mergers and acquisitions, and other ministries like finance are expected to have a look at the South African stand to see its relevance in the Indian situation.

Commenting on the issue, Corporate Affairs Minister Salman Khurshid said that “issues about corporate management, of policy, of national interest” would require more discussions.

The Competition Commission of India, the agency that has the mandate to monitor and clear (if need be) mergers and acquisitions, is awaiting the new rules to get actively involved in the M&A scrutiny.

The South African government had recently opposed the grand merger, and instead suggested an option for dual listing, an option that is very difficult under the current Indian laws.

The need for a ‘public interest’ clause was also raised by Delhi-based civil society groups after India’s largest drugmaker Ranbaxy was acquired by Japanese drug major Daiichi Sankyo last year.

“This (corporate affairs) ministry is not the only one involved here. Other ministries will also have to take a view. Collectively, we will have to take a view. The point, of course, is shall we learn something from South Africa? Why do they insist upon dual listing? Is it to preserve the identity, if so, preserve the identity at what cost?” Khurshid asked.

Post Daiichi-Ranbaxy deal, speculations are strong over the possibilities of similar transactions involving other major Indian drug companies also. The share prices of Dr Reddy’s, the second largest drug company, has risen to record levels over the market buzz relating to acquisition talks.

Khurshid said his ministry was engaged in regular consultations with various stakeholders to finalise the M&A rules under the Competition Act, 2007. “It is not being delayed. We are still consulting and we want to do it as quickly as possible. It is after all for the industry and we want the industry to go along with it. We should ensure that the entire industry is largely with us, so that’s the process that is going on.”