Introduction
India’s merger control framework is moving into a new phase. The introduction of the Deal Value Threshold (‘DVT’) under the Indian Competition Act, 2002 (‘Act’), along with the updated CCI (Combinations) Regulations, 2024 (‘Combination Regulations’) and recently issued Frequently Asked Questions (‘FAQs’) by the Competition Commission of India (‘CCI’) marks a clear shift in regulatory focus.
Traditionally, merger notifications in India were driven primarily by asset and turnover thresholds which resulted in certain technology driven or early stage businesses with limited revenues falling outside the scope of mandatory review. The revised framework moves beyond a purely threshold-driven framework towards a more substantive assessment focused on the economic value and competitive impact of transactions.
For businesses, this change is more than just procedural. Competition law analysis is becoming a key part of transaction structuring, especially in joint ventures (‘JVs’) where parties combine existing businesses, share governance rights or implement phased investment arrangements. In such structures, merger control assessment needs to be undertaken at the earliest stage of deal planning to avoid any unintended notification triggers or delays.
Deal Value Threshold
The introduction of the DVT is one of the most significant developments in India’s merger control regime in recent years. This expands the scope of CCI scrutiny by capturing transactions that may previously have fallen outside traditional asset or turnover thresholds.
Under the revised framework, a transaction must be notified to the CCI where:
(i) the value of a transaction exceeds INR 2,000 crore (Rupees two thousand crore); and
(ii) the entity being acquired has Substantial Business Operations (‘SBO’) in India.
Deal teams are now required to assess two cumulative elements: (i) the determination of the ‘value of the transaction’, and (ii) an assessment of whether the enterprise being acquired has ‘SBO’ in India.
Both criteria should be satisfied for the notification requirement to be triggered. While the threshold amount provides a numerical trigger, the SBO test adds a qualitative assessment that requires closer scrutiny of the target’s operations and market presence in India.
Value of the Transaction
Regulation 4 of the Combination Regulations provides a broad framework for computing DVT which includes all forms of consideration, direct or indirect, immediate or deferred, inter-connected, in cash or otherwise. The calculation includes payments for covenants, call options, technology assistance agreements, intellectual property licensing, and any other arrangements that may occur as part of the transaction.
While ‘value of the transaction’ was interpreted broadly to include all forms of consideration, however, there were certain gaps with regards to interpretation and computation of DVT that remain unanswered for complex deal structures. The FAQs issued by CCI provided much needed clarity and emphasized the aspect that the deal value must reflect the economic reality of the transaction, rather than its legal form.
Certain key clarifications include:
(i) Call options are generally treated as equivalent to shares and included in the transaction value unless vesting is contingent on uncertain future events beyond the parties’ control or occurs beyond 2 (two) years. In relation to put options, CCI clarified that the same will not be treated as shares and thus will be excluded while computing value of the transaction.
(ii) For share swaps, it will be considered as inter-connected transaction and the value of the transaction will include the aggregate values of both the share acquisitions.
(iii) Where a seller remains in the significant management role of the target and receives further payment(s) based on future performance such as earn-outs, the estimated amount of those payments will be included in the value of the transaction. In the event where no estimate is recorded, the maximum possible payout will be considered.
(iv) Where share acquisition and debt transactions are occurring simultaneously, for pure debt transaction notification to CCI is not required and thus the same will not be considered while computing the value of the transaction. However, if any debt is assumed by the acquirer, then such assumed debt will be included in the value of the transaction as it is also a consideration for the seller.
The FAQs also expand aggregation requirements to include prior investments made within 2 (two) years by an investor or its group in the same target. From a structuring perspective, this reduces the effectiveness of staggered investments as a strategy to remain below notification thresholds.
SBO test to be applied at Enterprise Level
The SBO test operates as the second trigger for DVT notification and has been a key area of interpretational debate. Regulation 4 of the Combination Regulations provides an enterprise shall be deemed to have substantial business operations in India if it meets any one of the following criteria:
(i) for digital services provided, the number of its business users or end users in India is 10% or more of its total global number of such users; or
(ii) its Gross Merchandise Value (‘GMV’) for the period of twelve months preceding the relevant date in India is 10% or more of its total global GMV and it exceeds INR 500 crore; or
(iii) its turnover in preceding financial year in India is 10% or more of its total global turnover derived from all products and services and it exceeds INR 500 crore.
In practice, questions arose regarding how the SBO test applies in multi-layered transaction structure. There was ambiguity regarding whether the SBO assessment should be limited to the immediate target entity or whether downstream entities and subsequent acquisition structures should also be considered for determining SBO in India.
The FAQs issued by the CCI provide important clarification in this regard and confirm that the SBO assessment is to be applied at the level of the “enterprise being acquired”. The manner of applying this test may therefore differ depending on the structure and sequencing of the transaction. This clarification assumes particular relevance for layered investment structures and transactions involving multiple interconnected steps. For example, where an investor acquires Company A and Company A subsequently acquires Company B, the analysis may differ across transaction steps:
(i) For the investor’s acquisition, the combined operations of the enterprise being acquired may be considered.
(ii) For Company A’s acquisition of Company B, the assessment focuses on Company B independently.
As a result, parties should avoid relying on a single consolidated SBO analysis. Each limb may require separate evaluation. This analysis is especially relevant for joint venture structures where one or more partners contribute operating businesses into a JV platform followed by downstream acquisitions or integrations undertaken through the JV entity. In such scenarios, the SBO test may apply differently at each stage, requiring independent assessment of notification obligations.
Overlap Mapping and Expanded Affiliate Analysis
While the DVT and SBO framework determine whether a transaction becomes notifiable, the revised merger control regime also significantly expands the scope of competition assessment once a filing obligation arises. In particular, the clarifications issued through the FAQs indicate a shift towards a broader and more structured approach to overlap mapping, which may materially increase the diligence burden on parties.
Until recently, practitioners typically limited overlap analysis to identifying horizontal, vertical or complementary overlaps between the immediate parties and their group entities. However, the updated framework expands both the range of entities to be examined and the nature of relationships that may be relevant for competition assessment.
A key development is the introduction and clarification of the concept of the Ultimate Controlling Person (‘UCP’), which determines the perimeter of entities whose activities must be considered for overlap analysis. The CCI has clarified that, for the purposes of assessing overlaps:
(i) on the acquirer side, the analysis extends beyond the acquiring entity to include entities controlled by the UCP, affiliates of the UCP, affiliates of controlled entities, and controlled entities of such affiliates; and
(ii) on the target side, the scope includes downstream controlled entities as well as affiliates and related entities connected through ownership or influence structures.
This represents a significant expansion compared to earlier practice, particularly for private equity structures, conglomerate groups and multinational investors where ownership and control relationships may span multiple jurisdictions.
A further development introduced through the FAQs is the expanded definition of ‘affiliate’. Under the revised framework, entities that possess the right or ability to access Commercially Sensitive Information (‘CSI’) may be treated as affiliates even in the absence of formal control or board representation. The FAQs provide indicative guidance on what may constitute CSI, thereby introducing a broader functional test based on access to strategic information rather than purely structural control.
From a practical standpoint, this development has important implications for transaction planning. Overlap mapping is no longer a narrow enterprise-level exercise focused solely on direct competitors. Instead, parties must assess governance rights, information-sharing arrangements, fund structures and contractual relationships that may create indirect competitive linkages.
This expanded scope is particularly relevant for transactions seeking to utilise the green channel route, as inaccurate or incomplete overlap identification may affect eligibility and increase regulatory risk. As a result, overlap mapping is emerging as a core element of merger control diligence, requiring early engagement between commercial, legal and competition teams.
Conclusion
For joint ventures, these developments are particularly significant. While the FAQs clarify that newly formed greenfield joint ventures are generally exempt from notification under the DVT framework, JV arrangements involving contributions of existing businesses, strategic investments, equity swaps or subsequent acquisitions should be carefully evaluated against both the DVT and SBO criteria. In addition, expanded affiliate analysis and overlap mapping requirements mean that governance rights, information-sharing arrangements and collaborative decision-making structures may materially influence competition law assessment.
In our view, parties structuring joint ventures in India should integrate merger control analysis into the early stages of negotiation and design. A proactive assessment of deal value, enterprise-level operations and competitive overlaps will be essential to ensure regulatory certainty and avoid execution delays under India’s evolving merger control landscape.
Written by - Nidhi Arora (Partner) and Shruti Mandora (Associate)