 "Speed up M&A approval process, Mr Deora")
Murli Deora knows business. He also knows that time is of the essence. While addressing a conference in New Delhi on Thursday, he said that the Competition Commission of India will check mergers that end up creating monopolies and impede orderly economic growth. This is an obvious task for any competition commission and a no-brainer.
Deora as the minister of corporate affairs, needs to assure the financial community that India will expedite regulatory clearances for mergers without compromising on the quality of regulation. Currently, it takes six months to one year to clear any mergers and acquisition transaction.
In developed markets, companies combine forces within a month in a merger situation.
[caption id=“attachment_1600” align=“alignleft” width=“300” caption=“Murli Deora (R) needs to assure the financial community that India will expedite regulatory clearances for mergers without compromising on the quality of regulation. Juan Bareto/AFP”]
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To be fair, according to the new sections added to the Competition Commission Act of 2002, the maximum time limit the CCI would take to vet mergers has been reduced to 180 days from the earlier 210 days. PTI adds that this was after facing opposition from the industry.
Companies with a turnover of over Rs 1,500 crore will have to approach the CCI for approval before merging with another firm.Besides, only those proposals would need the CCI’s nod where the companies have combined assets of Rs 1,000 crore or more or a combined turnover of Rs 3,000 crore or more. Also, the target company’s net assets have to be a minimum of Rs 200 crore or it should have a turnover of Rs 600 crore for CCI intervention.
But this comes into effect only for those companies that are large enough to warrant interest from the competition commission. This still leaves the long process of approvals and other legal clearances to follow. From merely reacting to monopoly situations the clearance process has to become more proactive such that businesses can consolidate efficiently.