Competition Commission of India (CCI) will soon begin a market study on private equity investments in India, with special focus on common minority ownership among various firms in the same industry by such investors and its impact on competition, CCI Chairman Ashok Kumar Gupta has said.
This comes at a time when PE investments have surpassed strategic investments in India during this year. A new trend has emerged in India where FDI investments have been overtaken by the PE investments. It is estimated that about $40 billion of PE money would get deployed in India this year.
Issue of overlapping
Addressing Confederation of Indian Industry’s Annual Conference on Competition Law held virtually this year, Gupta highlighted that many of PE investments are in multiple firms of the same industry leading to product market overlaps and therefore the issue of common ownership by minority shareholders across firms and its impact on competition needs to be understood.
“In order to understand the trends and patterns of common ownership by PE investors across sectors in India, the CCI is going to shortly conduct a market study. The study aims to gauge the common PE investors underlying incentives and motivation behind such 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 the firm consequently impacting competition,” Gupta said.
The study will help CCI in identifying kind of shareholding rights available to common shareholders and the type of influence these rights provide and the kind of available safeguards in company policies in mitigating competition concerns if any, he said.
It maybe recalled that CCI has already been examining sub 10 per cent investments in target enterprises by PE investors where there is even a single board seat in target enterprise.
CCI has already undertaken market study of e-commerce. In October 2020, recognising that Quality, access and affordability are key determinants of public health, CCI had launched a market study of pharmaceutical sector in India. This study focuses on distribution segment of pharmaceutical industry in India with a view to understand discounts and margins at wholesale and retail levels of distribution systems; impact of e-commerce on price and competition; extent of proliferation of generic branded drugs and its implication for competition and its impact on entry of bio equivalent and bio similars in India.