Main laws governing mergers and acquisitions
Positive legal and regulatory improvements


India had a records 2021 in closing deals, aligned with the global trend, and the technology, media and telecommunications (TMT) sector was the most active. However, despite a global slump in M&A activity in 2022 – due to the Russian-Ukrainian conflict, rising inflation, constraints in supply chains, the prolonged effects of covid-19 and other geopolitical and financial headwinds – India saw a fairly steady rise in M&A activity in the first half of 2022. According to data compiled by Bloomberg, the first half of 2022 saw a new record high in M&A activity, equating to a total of $82.3 billion in completed and pending deals. Valued at $11.5 billion, the TMT sector dominates the M&A market in India.

Additionally, companies continually look to mergers and acquisitions as a way to acquire the technology to achieve digital transformations. Overall, the TMT sector experienced a 21% increase in trading volume during the first half of 2022, compared to the same period in 2021.

The dynamic nature of the regulatory framework in India helps support industrial growth with reforms aimed, for example:

  • facilitate business;
  • create technology-driven solutions; and
  • enhance the customer experience.

This article is part of a series on mergers and acquisitions in the Indian tech industry and, in particular, examines these legal reforms in more detail.

Main laws governing mergers and acquisitions

The following six laws broadly govern mergers and acquisitions in India:

  • the Companies Act 2013 – the main legislation governing companies, capital investments and mergers and acquisitions;
  • various regulations relating to the Securities and Exchange Board of India (SEBI) – such as the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011, and other rules which govern securities markets and listed companies;
  • Foreign Exchange Management Act 1999 – Foreign exchange in India is regulated by the Reserve Bank of India with the support of the government, through various rules and regulations promulgated to regulate the inflow and outflow of capital;
  • the Income Tax Act 1961 and other tax legislation – these govern tax structures and treatments;
  • the Competition Act 2002 – various domestic and international transactions may require anti-rust clearances from the Competition Commission of India (ICC) to protect domestic markets from monopolistic or captive openings. India’s competition regime also provides for a “green canal route“for expedited approvals of M&A transactions that do not cause or have the potential to cause a material adverse effect on competition in India; and
  • the Insolvency and Bankruptcy Code 2016 – which governs the process of resolving corporate insolvency.

Positive legal and regulatory improvements

The government has kept up with the digital transformation and has been working to change laws and reform procedures to give effect to the legal prowess of regulators, ensuring legitimate and market-friendly M&A activity for the Indian market.

Promoting manufacturing in India
The manufacturing arm of the technology industry has also received a significant boost through the introduction of Production Linked Incentive (PLI) schemes by the government since 2020. The PLI schemes provide eligible manufacturing companies with incentives, based on additional sales of identified products, with the aim of boosting domestically produced products and reducing dependence on imports. Recently, an NITI Aayog committee approved 32 recipients in the large-scale electronics industry, including specified mobile and electronic component manufacturers. The government is also planning to introduce new PLI schemes for more products in technology, automotive and other industriesas well as a program for semiconductors, amounting to 2.7 to 3 trillion Indian rupees.

The Department of Telecommunications notified on February 24, 2021 a PLI program intended to promote the objectives of the “Make in India” project and to stimulate the local production of telecommunications and network equipment, such as Internet of Things devices. The government also notified a PLI program for the manufacture of drones and drone components and promoted “drones as a service”, attesting to their use for the delivery of drugs and vaccines under the “Medicine from the Sky”.

Foreign investment in India
Since the launch of the “Make in India” project in 2014, India has registered a record $83.6 billion in foreign direct investment (IDE) in fiscal year 2021-2022 and expects to surpass $100 billion in fiscal year 2022-2023. Last year the software and hardware industry landed the highest FDI at 24.60%. This year’s countdown started with the buzz around Google invests $1 billion in Bharti Airtelwhich ended in July 2022 and aims to strengthen current and future technology projects.

The framework for foreign investment in India has also undergone constructive changes, liberalizing processes and sectoral nuances and inviting more FDI into India. In recent years, many other sectors have been opened up to foreign investment – ​​the telecommunications sector, for example, now allows up to 100% FDI under the automatic route.

Investment abroad
According to the Department of Economic Affairs, India’s outward direct investment amounted to $17.53 million in the financial year 2021-2022, registering an annual growth of almost 42%. However, global financial headwinds impacted the first half of FY2022-23 figures, with a visible year-on-year decline of more than 50% in some months.

Investments abroad contribute to the growth of the technology sector, as many Indian companies can realize innovative collaborations, integrated technological capabilities and new business strategies through these investments. Wipro acquired Rizing to expand its SAP cloud consulting capabilities and services, and to reinforce CEO Thierry Delaporte’s preference to “buy” rather than “build” in a rapidly changing technology landscape.

The government, recognizing the need for reform of the foreign investment regulatory regime, recently released a new foreign investment framework, in consultation with the Reserve Bank of India (RBI). The new framework has liberalized and streamlined many regulatory processes and provides much-needed clarification on various concepts. This new regime takes a step towards the government’s ideals of promoting ease of doing business, by bringing various transactions under the automatic route, which previously required prior approval from the RBI.

Modernization of the regulatory framework for the technology sector
The Indian government and regulators are also paying attention to this technological rise and carefully monitoring the regulatory landscape surrounding new technologies. Furthermore, in line with the overall cross-sector approach, the government is also considering revising and modernizing the existing legal framework (which includes some archaic laws) with respect to the telecommunications and technology sectors as well as privacy and protection. Datas.

Amendments proposed under the Competition (Amendment) Bill 2022 aim to structure the regulatory framework and formalize antitrust assessments surrounding digital markets. The CCI is also in the process of setting up a digital markets unit to assess the conduct of e-commerce platforms and other big tech companies, showing a positive development in regulatory oversight in the tech sector.

While these regulatory reforms may have some impact on tech mergers and acquisitions in the near term, the overall outlook remains positive as the tech industry matures and benefits from clearer rules of engagement.

A key example in this regard is the health technology sector. Telemedicine and teleconsultation, which have seen a marked increase during the covid-19 shutdowns, have been formalized by the government through the telemedicine practice guidelines released in 2020. These progressive developments in the telemedicine technology space healthcare have attracted the attention of various investors as a lucrative opportunity, and the value of the transaction in this sector has affected approximately $4 billion in the first half of 2022, continue the upward trend from 2021. Acquisition of BASE Life Sciences by Infosys is a fine example of the technology player’s desire to integrate with the health sector.


While major economies, such as the United States, have observed a slowdown in M&A activity due to factors such as increasing stock market volatility and runaway inflation, India knows and waits with looks forward to steady and exciting growth in technology-related business in the remaining half of the 2022-23 fiscal year. A significant volume of M&A activity in the first half of 2022 was driven by the start-up, e-commerce and IT sectors, accounting for 76% of all transactions, and the IT and manufacturing sectors had the second highest contribution in terms of deal value. The introduction of several investor-friendly reforms and periodic reviews of existing standards in the Indian regulatory landscape have improved M&A activity and facilitated doing business in India, especially with the rise of technology and sectors. related.

For more information on this subject, please contact Gaurav Dayal or Amrusha Monga at Lakshmikumaran & Sridharan by phone (+91 (11) 4129 9800) or email ([email protected] Where [email protected]). The Lakshmikumaran & Sridharan website can be accessed at