Will new competition rules open the door for more hostile takeovers?

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Subscribe to enjoy similar stories. New Delhi: Hostile takeovers in India just got a fillip from the country’s competition watchdog.

Companies will not need approval anymore from the Competition Commission of India (CCI) for buying up to 25% shares of a target company in the secondary market before making a formal bid. This provision was among several changes in merger and acquisition (M&A) rules notified last week by the CCI.

The CCI Criteria for Exemption of Combinations Rules, 2024 also lists instances like acquisition of shares as part of bonus issue, stock splits, consolidation of face value and group restructure, which do not lead to change in control, as transactions that do not require its prior approval. Earlier, companies could be penalized for not taking CCI approval before making such secondary share purchases, explained a former official of the watchdog, who spoke on condition of not being named.

“Seeking CCI permission for incremental stock market transactions, which are dynamic by nature, was not feasible," this person said. “The government has corrected this anomaly, and it is a move in the direction of improving ease of doing business." Any business acquiring 25% stake in a listed company is required to make an open offer to public shareholders as per regulations of market regulator Securities and Exchange Board of India (Sebi).

Rahul Rai, partner and co-founder of law firm Axiom 5 Law Chambers, said that such secondary transactions need to be notified to the CCI within 30 days of initial on-market acquisition. “This is important for certain unsolicited investments in listed enterprises and their acquisitions (hostile takeovers) as it helps to preserve the strategic nature of the transaction and