India antitrust regulator to probe private equity

Ashok Kumar Gupta, chairman of the Competition Commission of India (CCI), told a conference that reduced strategic investment activity because of COVID-19 had resulted in private equity becoming a more significant source of capital. The study will examine the underlying incentives and motivations behind PE investments.

“It is important to look at the rights they get to protect their legitimate financial interests from their shareholdings and whether these rights can translate into their ability to influence the decision of a firm consequently impacting competition or whether the investor and the company holding the minority shareholding will classify as a ‘passive’ investor,” Gupta said.

CCI has already been looking into transactions where PE investors take interests of below 10% in companies and receive a board seat. Given these investors sometimes back several companies in the same industry, leading to product-market overlaps, “the issue of common ownership by minority shareholders across firms and its impact on competition needs to be understood,” Gupta added.

AVCJ Research’s records show that M&A deals involving Indian target companies stand at just over $80.9 billion for 2020 to date. This compares to $84.7 billion for the entirety of 2019. FDI was $43.2 billion for the first nine months of the year, with $27.1 billion coming in August alone, a single-month record, according to the Department for Promotion of Industry and Internal Trade. This compares to $47.6 billion for the whole 12 months of 2019.

Private equity investment is a subset of the broader M&A figure. With $33.5 billion committed so far this year, it remains to be seen whether the record $36.6 billion total from 2019 can be surpassed. Private equity as a share of overall M&A is 41%, versus 43% last year. This percentage has been rising steadily in recent years. The average for the eight years to 2018 was 28%.

While more capital is flowing from private equity investors, it is increasingly concentrated on a relatively small number of large-cap deals. There have been 17 transactions of $500 million or more in 2020 to date and they account for 51% of all capital deployed. In 2019, 14 of these deals made up 35%.

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• Topics
• South Asia
• Regulation
• Investments
• India