0:57 Jackson: So, Nia, let’s get tactical. If a listener is sitting on a term sheet right now, how do they actually run the numbers to see if they need to call the Competition Commission of India? You mentioned a four-test checklist—is it as simple as just looking at the target’s bank account?
1:14 Nia: I wish it were that simple, Jackson, but it’s actually a bit more expansive. To determine if a transaction is a "reportable combination" under Section 5 of the Competition Act, you have to look at both the individual parties and the larger groups they belong to. Think of it as a series of financial hurdles. If you trip over even one of them, you have to notify the CCI. It’s not a "meet all four" situation—it’s an "any one of these triggers a filing" situation.
1:41 Jackson: Okay, so it’s an "OR" logic, not an "AND" logic. What’s the first hurdle?
1:46 Nia: The first two are the "Parties Test." This looks at the combined financials of the acquirer and the target. As of the March 2024 revisions, the thresholds were actually increased by 150% to account for inflation and economic growth. So, for the Asset Test, if the combined assets in India are over ₹1,250 crore, you’re in. Or, on the Turnover side, if the combined India turnover is over ₹3,750 crore, that’s a trigger.
2:12 Jackson: And that’s just the domestic side, right? What if we’re talking about a global giant buying an Indian firm?
2:19 Nia: Great point. The law has a "Worldwide Threshold" too. If the parties together have global assets over 5 billion dollars—with at least ₹500 crore of that being in India—or a global turnover over 15 billion dollars, the notification requirement kicks in. It’s designed to capture those massive cross-border deals that have a significant footprint here.
2:41 Jackson: Right, because a deal happening in New York or London can still fundamentally shift the competitive landscape in Mumbai or Bengaluru. But you mentioned a "Group Test" as well. That sounds like it could catch a lot of people off guard if they’re part of a massive conglomerate.
2:58 Nia: Absolutely, and this is where a lot of private equity firms and conglomerates get tripped up. The Group Test looks at the entire ecosystem the target is joining. If the group’s total assets in India exceed ₹5,000 crore, or their India turnover is over ₹15,000 crore, the deal is reportable. Imagine a small startup being bought by a massive Indian tech group. The startup itself might be tiny, but because the group it’s joining is a titan, the CCI wants to take a look.
3:26 Jackson: It makes sense—the "muscle" of the parent company matters. But wait, we’ve talked about assets and turnover, but we haven't touched on that new "Deal Value Threshold" or DVT that’s been the talk of the legal community since September 2024. How does that change the game?
3:42 Nia: The DVT is the real disruptor here, Jackson. It’s Section 5(d), and it’s specifically designed to close what the Competition Law Review Committee called the "enforcement gap." Before this, you could have a billion-dollar acquisition of a data-rich startup that had almost no revenue or physical assets—think of a pre-revenue AI company—and it would slip under the radar because it didn't hit the asset or turnover marks.
4:06 Jackson: Right, because in the digital economy, value isn't always in the factory or the sales ledger—it’s in the users or the tech.
4:13 Nia: Exactly! So now, if the transaction value—and this includes everything: cash, stock, earn-outs, non-compete payments—exceeds ₹2,000 crore, you have to notify the CCI. But there’s a catch: the target must have "Substantial Business Operations in India," or SBOI.
4:31 Jackson: "Substantial Business Operations." That sounds like a term lawyers could argue about for years. Is there a concrete way to measure that?
4:38 Nia: Thankfully, the 2024 regulations gave us some clear metrics. For non-digital companies, it’s usually if more than 10% of their global turnover comes from India and that amount is over ₹500 crore. But for digital companies—platforms, apps, SaaS providers—it’s much broader. If 10% or more of their global turnover is from India, OR—and this is the big one—if 10% or more of their global business or end users are in India, they meet the SBOI test.
5:06 Jackson: Wow, so a global app with 100 million users, where 10 million are in India, would trigger this even if they haven't made a single rupee in India yet?
5:15 Nia: Precisely. If you’re buying that app for more than ₹2,000 crore, you are headed to the CCI. And here is the kicker for the project managers out there: the DVT overrides the "De Minimis" or small target exemption. Usually, if a target has assets under ₹450 crore and turnover under ₹1,250 crore, you’re exempt. But if the deal value hits that ₹2,000 crore mark and they have those Indian users, that safety net vanishes. You have to file.
5:42 Jackson: That is a massive shift in strategy. It sounds like the first step for any deal team now is a comprehensive user-base and valuation audit, not just a look at the audited accounts.