Key laws governing M&A
Positive legal and regulatory upgrades


India had a record-breaking 2021 in deal-making, aligned with the global trend, and the technology, media and telecoms (TMT) sector was the most active. However, despite a global slump in M&A activity in 2022 – due to the Russia-Ukraine conflict, rising inflation, constraints in supply chains, long drawn-out effects of covid-19 and other geopolitical and financial headwinds – India witnessed a fairly stable 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 in M&A activity, equivalent to a total of $82.3 billion in completed and pending transactions. Valued at $11.5 billion, the TMT sector leads the M&A market in India.

Moreover, corporates are continually looking at M&A as a means to acquire technology to achieve digital transformations. Globally, the TMT sector saw a 21% rise in deal volume during the first half of 2022, compared with the same period in 2021.

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

  • facilitating business;
  • creating technology-driven solutions; and
  • bolstering customer experience.

This article is part of a series on M&A in the Indian technology industry and, in particular, examines these legal reforms in more detail.

Key laws governing M&A

The following six laws broadly govern M&A in India:

  • the Companies Act 2013 – the primary legislation governing companies, capital investments and M&A;
  • 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 that govern the securities markets and publicly listed companies;
  • the Foreign Exchange Management Act 1999 – foreign exchange in India is regulated by the Reserve Bank of India with government backing, through various rules and regulations promulgated to regulate capital inflows and outflows;
  • the Income Tax Act 1961 and other taxation legislations – these govern the taxation structures and treatments;
  • the Competition Act 2002 – various domestic and international transactions may require anti-rust approvals from the Competition Commission of India (CCI) to protect domestic markets from monopolistic or captive overtures. The Indian competition regime also provides a "green channel route" for fast-track approvals of M&A transactions that do not cause or have the potential to cause an appreciable adverse effect on competition in India; and
  • the Insolvency and Bankruptcy Code 2016 – this governs the corporate insolvency resolution process.

Positive legal and regulatory upgrades

The government has been keeping up with digital transformation and has endeavoured to amend laws and reform procedures to concretise the legal prowess of the regulators, ensuring legitimate and Indian market-friendly M&A activity.

Promoting manufacturing in India
The manufacturing arm of the technology industry has also received significant impetus through the introduction of production-linked incentive (PLI) schemes by the government since 2020. PLI schemes provide eligible manufacturing companies with incentives, based on incremental sales of identified products, with the aim of boosting domestically manufactured goods and reducing dependency on imports. Recently, a NITI Aayog committee approved 32 beneficiaries in the large-scale electronics industry, including manufacturers of mobiles and specified electronic components. The government is also looking at introducing newer PLI schemes for more products in the technology, automobile and other sectors, as well as a scheme for semiconductors, amounting to 2.7 to 3 trillion Indian rupees.

The Department of Telecommunications notified a PLI scheme on 24 February 2021 that is intended to promote the objectives of the "Make in India" project and boost local production of telecoms and networking equipment, such as Internet of Things devices. The government has also notified a PLI scheme for the manufacturing of drones and drone components and has been promoting "drones-as-a-service", evidencing their use for delivering medicines and vaccines under the "Medicine from the Sky" project.

Foreign investment in India
Since the inception of the "Make in India" project in 2014, India has recorded a high of $83.6 billion in foreign direct investment (FDI) in financial year 2021-2022 and expects to cross $100 billion in financial year 2022-2023. Last year, the computer software and hardware sector bagged the highest FDI at 24.60%. This year's tally began with the buzz around Google investing $1 billion in Bharti Airtel, which was completed in July 2022 and is aimed at bolstering current and future tech projects.

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

Overseas investment
According to the Department of Economic Affairs, India's overseas direct investment stood at $17.53 million in financial year 2021-2022, registering a year-on-year growth of nearly 42%. However, global financial headwinds have impacted the figures for the first half of financial year 2022-2023, with a visible year-on-year decline of over 50% in some months.

Overseas investments help grow the technology sector as many Indian businesses can achieve innovative collaborations, integrated technological capabilities and newer business strategies through such investments. Wipro acquired Rizing to extend its SAP cloud consulting capabilities and services, and to reinforce Chief Executive Officer Thierry Delaporte's preference to "buy" versus "build" in a rapidly evolving technology landscape.

The government, recognising the need for reform in the regulatory regime for overseas investment, recently issued a new overseas investment framework, in consultation with the Reserve Bank of India (RBI). The new framework has liberalised and rationalised many regulatory processes and provides much needed clarity on various concepts. This new regime takes a step towards the government's ideals of promoting ease of doing business, bringing various transactions under the automatic route, which previously required prior approval from the RBI.

Modernising regulatory framework for tech sector
The Indian government and regulators are also paying attention to this technological rise and are cautiously monitoring the regulatory landscape surrounding newer technologies. Moreover, in line with the general approach across sectors, the government is also looking at overhauling and modernising the existing legal framework (which includes some archaic laws) in relation to the telecoms and technology sectors as well as data privacy and protection.

Amendments proposed under the Competition (Amendment) Bill 2022 seek to structure the regulatory framework and formalise antitrust assessments surrounding digital markets. The CCI is also in the process of setting up a digital markets unit to assess the conduct of ecommerce platforms and other big tech ventures, which showcases a positive development of regulatory oversight in the tech sector.

While such regulatory reforms may somewhat impact M&A in the tech sector in the short term, the overall outlook remains positive as the technology industry matures and benefits from clearer rules of engagement.

A key example in this respect is the health-tech sector. Telemedicine and teleconsultation, which saw a marked rise during the covid-19 lockdowns, were formalised by the government through the Telemedicine Practice Guidelines issued in 2020. Such progressive developments in the health-tech space have caught the eye of various investors as a lucrative opportunity, and the deal value in this sector touched approximately $4 billion in the first half of 2022, continuing the upward trend from 2021. Infosys' acquisition of BASE Life Sciences is a great example of the technology player's intent towards integration with the healthcare sector.


While larger economies, such as the United States, have observed a slowdown in M&A activity due to factors such as rising stock market volatility and rampant inflation, India is witnessing, and looks forward to, steady and exciting growth in business surrounding the technology sector in the remaining half of the financial year 2022-2023. A large volume of M&A activity in the first half of 2022 was led by the start-up, ecommerce and IT sectors, accounting for 76% of all deals, and the IT and manufacturing sectors had the second highest contribution in terms of deal values. The introduction of several investor-friendly reforms and periodic reviews of existing norms in the Indian regulatory landscape have improved M&A activity and facilitated business in India, especially with the upsurge in technology and related sectors.

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