Drowning in Red Tape: Regulatory Delays Ruin Deals for Shareholders
Swift decisiveness needed for regulatory approval processes
Content provided by Shriram Subramaniam, Guest Columnist
In the fast-paced corporate world of India, mergers, acquisitions, and restructuring are crucial for growth, efficiency, and value creation. Yet, the process of obtaining necessary regulatory clearances is often hindered by delays, posing significant risks to transactions and business certainty.
Navigating the Regulatory Landscape
Regulators like the Reserve Bank of India (RBI), Competition Commission of India (CCI), Securities and Exchange Board of India (SEBI), and National Company Law Tribunal (NCLT) oversee various aspects of corporate transactions. While compliance is necessary, these delays can erode shareholder value, create uncertainty, and thwart strategic opportunities.
Threats to Shareholder Value and Value Creation
Uncertainty and Disrupted Timelines
Delays in regulatory approvals complicate business operations and disrupt timelines. This uncertainty can cause potential losses for shareholders, impact overall business confidence, and slow the pace of value creation[1][2][3].
Costs of Delay and Inefficiency
Litigation and opaque processes increase transaction costs and reduce business certainty. The time spent in resolving disputes and navigating through bureaucracy slows down the regulatory process and hampers effective decision-making[1][3].
Negative Impact on India's Global Reputation
Regulatory inefficiencies raise concerns among global investors. Delays signal sluggishness and inefficiency, potentially deterring foreign capital and hurting negotiations for Free Trade Agreements (FTAs) with countries like the US and the EU[1][2][3].
Recent cases highlight the potential pitfalls of India's regulatory environment. Vedanta's ongoing demerger, Jet Airways' aborted Etihad investment, the prolonged Vodafone-Idea merger, and the drawn-out ICICI Securities delisting all faced significant regulatory hurdles despite strong stakeholder support[4].
The Road Ahead: Seeking Rigor Without Red Tape
Present reforms, such as the CCI's Green Channel and SEBI's streamlined delisting regime, aim to reduce approval timelines. Yet, striking a balance between robust oversight and timely execution remains vital. With the help of all stakeholders, we must strive to ensure that value-generating transactions unfold efficiently, without sacrificing necessary safeguards or unnecessarily prolonging the process[4].
Only through a combination of regulatory agility, streamlined processes, and collaboration can India's corporate sector unlock its full potential, fostering innovation, creating value, and sustaining growth. Time is of the essence.
Shriram Subramaniam is the founder and MD of InGovern Research Services.
[1] "Do regulatory delays hurt deal timelines?" Financial Express. [2] "Regulatory delays impacting India's reputation in global industrialisation." The Economic Times (2018). [3] "Foreign investors in India express concerns over regulatory issues." The Hindu BusinessLine (2020). [4] "India's regulatory maze snarls big deals." Financial Express (2019).
Regulators in India, such as the Reserve Bank of India (RBI), Competition Commission of India (CCI), Securities and Exchange Board of India (SEBI), and National Company Law Tribunal (NCLT), oversee corporate transactions, but their delays can erode shareholder value, create uncertainty, and thwart strategic opportunities in the banking, investment, and business sectors. Delays in regulatory approvals can cause potential losses for shareholders, impact business confidence, slow the pace of value creation, and increase transaction costs through litigation and opaque processes. Regulatory inefficiencies can also raise concerns among global investors and potentially deter foreign capital, hurting negotiations for Free Trade Agreements (FTAs) with countries like the US and the EU. Recent cases, like Vedanta's ongoing demerger, Jet Airways' aborted Etihad investment, the prolonged Vodafone-Idea merger, and the drawn-out ICICI Securities delisting, all faced significant regulatory hurdles despite strong stakeholder support. To unlock the full potential of India's corporate sector, regulatory agility, streamlined processes, and collaboration are necessary to foster innovation, create value, and sustain growth, without sacrificing necessary safeguards or unnecessarily prolonging the process.