The healthcare and pharma sector in India has witnessed continued growth and consolidation, with a marked increase in private equity-backed investments and strategic acquisitions with deal values increasing significantly, driven by growing investor interest and confidence in the sector, particularly in hospitals and related services.

In 2024, the hospital sector emerged as a preferred investment destination, with significant interest from both domestic and international players. Investors have increasingly seen value in expanding healthcare infrastructure, especially given the growing demand for healthcare services and India’s expanding middle class and ageing population.

The digital transformation of healthcare has remained a key driver for M&A activity. With the rise of telemedicine, healthtech start-ups and digital health platforms, the Indian healthcare market continues to grow and attract investment.

Over the last 12 months, India’s healthcare sector has continued to evolve, driven by a combination of technological advancements, growing demand and regulatory changes. Private equity investments were substantial in 2024, with private equity-backed deals helping companies expand their footprints across multiple healthcare segments, including hospitals, diagnostics and medical devices.

The government’s focus on healthcare reforms and initiatives like Ayushman Bharat and Production Linked Incentive (PLI) schemes have also fuelled the growth in this sector.

India is a preferred jurisdiction for entrepreneurs looking to incorporate a new company. Historically, there was a trend towards having a parent-subsidiary structure with the parent company being incorporated in a tax friendly jurisdiction. However, with the diminution in tax treaty benefits and a fast-growing economy, there has been a shift in approach with entrepreneurs preferring to set-up new companies in India and also re-domiciling (existing overseas companies) to India.

The timelines for incorporation vary depending on whether the shareholders are domestic entities/individuals or foreign entities/individuals. In the case of foreign entities/individuals, the incorporation process can take six to eight weeks due to additional requirements like notarisation and apostille.

There are no initial paid-up capital requirements for incorporation from a local law perspective. New companies are typically incorporated with a nominal capital (usually around INR100,000), and additional funds are infused post-incorporation depending on business requirements.

In India, entrepreneurs can set up a business through various types of for-profit entities, the most popular forms being those of a private limited company, public limited company or a limited liability partnership. The most preferred form of entity for incorporation is a private limited company. Private limited companies are particularly favoured for their advantages in fund-raising, incorporation of investor rights and reduced corporate and regulatory filings.

In India, a start-up company can secure early-stage funding from friends and family, angel investors, domestic and foreign venture capital funds with a focus on early-stage start-ups, and family offices.

The documentation for funding varies depending on the nature of investment (primary investment or secondary investment or a combination of both). The transaction documents typically include a securities subscription agreement and a shareholders’ agreement, and an amended set of Articles of Association (typically reflecting the provisions of the shareholders’ agreement). Additional agreements may also be executed with the founders, such as employment contracts.

Various reports state that India has the third largest start-up ecosystem in the world. This has led to a thriving network of domestic venture capital funds that actively invest in start-ups and late-stage companies. Early-stage funding is readily available to start-ups, especially in high growth sectors such as healthcare and fintech. Additionally, the Indian government has also launched several initiatives to support start-ups, including providing funding through incubation centres. Given the growing innovation in the Indian start-up ecosystem, foreign venture capital funds have also been very active in India.

India’s venture capital ecosystem includes several industry bodies and associations that play a role in supporting and advocating for the venture capital and start-up community. However, there are no established templates for venture capital documentation. That said, there are well-developed, and market accepted standards, albeit informal and not imposed by regulation or any particular industrial body or association, for documentation in the case of venture capital investment in India.

The prevailing trend in India indicates that start-ups typically maintain their place of incorporation within the country. However, when preparing for an initial public offer (IPO), companies need to convert from the form of a private limited company to the form of a public limited company.

Some companies that previously operated under an overseas holding structure are now re-domiciling to India in order to optimise business operations and growth as well as exit strategies for their investors.

A few years ago, Indian companies also explored the option of overseas listing through special purpose acquisition vehicles (SPACs). This strategy was largely driven by the opportunity to access global markets and foreign capital. 

While the choice of exit would depend on a lot of factors (such as how public markets are performing, at what stage the target company is, etc), there is no clear, identifiable trend. That said, anecdotally, exits by way of an IPO appear to be less frequent than those through a sale process; although IPO exits may result in more significant returns. Frequently, in the case of investments in early-stage start-ups, investors exit by way of a sale to another financial or strategic investor. However, most investors like to retain flexibility in the transaction documents so that the exit can be structured to maximise returns.

Until 2024, an Indian public limited company was allowed to list only on an Indian exchange in accordance with the Companies Act, 2013 (the “Companies Act”) and the rules and regulations of the Securities and Exchange Board of India (SEBI), the Indian securities market regulator. On 24 January, 2024, the Ministry of Corporate Affairs notified the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 (the “Overseas Listing Rules”) and the Ministry of Finance notified the FEMA (Non-debt Instruments) Amendment Rules, 2024 amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, which paved the way for eligible public companies in India to list their equity shares on permissible international stock exchanges. The Overseas Listing Rules lay down the provisions for applicability, eligibility of Indian public companies and the requirements to be met in India for the overseas listing of equity shares of eligible companies. The Overseas Listing Rules also take note of the listing and disclosure requirements of the international exchanges that would be required to be met in relation to the listing, and prescribe a procedure for the reporting of the compliances undertaken by the issuer under the laws of the international exchanges on which it proposes to list its equity shares.

A lot of foreign domiciled start-ups are flipping their structures to have India as their base jurisdiction prior to listing. This is mainly for reasons such as:

• an improved regulatory environment;
• favourable business environment (including valuations) and investor sentiment; and
• cost efficiency and talent pool.

Please also refer to 2.1 Establishing a New Company and 2.6 Change of Corporate Form or Migration.

Indian corporate law has provisions which allow for the squeeze out of minority shareholders. While squeezing out minority shareholders has been widely litigated in the past with mixed results, primarily favouring minority shareholders, the Indian tribunals have now allowed squeeze outs based on the provisions for reduction of capital under the Companies Act. However, if the shares are listed in an overseas exchange with overseas investors, the squeeze-out provisions applicable to forced minority exits in that specific jurisdiction will apply. In the authors’ experience, many foreign jurisdictions allow for squeeze outs pursuant to tender offers, but this must be analysed on a case-by-case basis. It should also be noted that the minority squeeze out of foreign currency-denominated overseas-listed equity shares issued pursuant to the Companies Act may be treated as “equity share capital”. Accordingly, minority squeeze of these foreign listed equity shares may also require approval from the Indian tribunals pursuant to a reduction of share capital scheme.

While such sale processes have traditionally culminated in a bilateral negotiation, auction-based processes are becoming more common. Frequently, these auctions are run by investment bankers who are mandated to find the new buyer/investor, as price discovery is more accurate and time efficient. In an auction-based process, the company also has more flexibility to choose the incoming investor/acquirer based on the price as well as favourable deal terms.

The transaction structure for the sale of a privately held company (including healthcare companies) depends on a number of factors, such as:

• exit timelines committed to the VC investors;
• fund life criteria;
• valuation; and
• other economic considerations.

However, when VC investors do sell their entire stake (for considerations such as fund life), the following two outcomes appear to be the most likely:

• if VC investors are exiting to another financial investor, the incoming investor often still wants the promoters to have skin in the game and not receive meaningful liquidity before an incoming investor’s eventual exit; or
• if the incoming investor is a strategic player in the industry, it may want to acquire the entire company and may agree to leave a small stake with the promoters if the promoters are involved in transition support or will continue in business and operational roles post transaction.

More recently, private equity funds have participated in buy-out deals where professional management teams are put in place to run the business post-acquisition. While not uncommon, in companies where there are a number of early-stage VC funds, such VC funds have a choice to continue as shareholders in the company being purchased by a strategic player.

Most buy-out transactions are done in cash, which often involves staggered payouts. In some cases, if the acquirer is a public listed company, the consideration may be a combination of cash and stock. It should, however, be noted that it is not possible to buy an entire public listed company in India as the public float is compulsorily required to be 25% unless a takeover and simultaneous delisting is planned. Takeovers with simultaneous delisting are rare and usually unsuccessful as the tendering has to be of a very high percentage. Further, the price of the delisting offer is expected to be higher than the mandatory tender (ie, open) offer (MTO) price (which is the higher of the negotiated takeover price and the market price), and so the delisting offer comes at a price. As a result, it may be commercially wise for companies to be first acquired along with a compulsory MTO and then undertake a delisting.

In cross border transactions involving a foreign acquirer, a cash deal is most prevalent, with combinations of stock and cash being less common and only stock-for-stock deals being rare. 

Founders are expected to stand behind business representations and warranties where they hold a significant stake and are actively running operations. VC investors typically provide fundamental warranties limited to the title to shares, the authority and capacity to execute and perform the transaction documents, and tax warranties only related to the sale of their stake. Escrow and holdbacks are not customary but are typically included to address specific risks. Further, for cross-border transactions, exchange control laws also regulate what percentage of the consideration can be held back and for how long.

Warranties insurance is still relatively uncommon in India, but the trend (to procure such insurance) is noticeably increasing especially where the selling shareholders are funds. With an increasing number of players entering the warranty insurance market for transactions, it is likely that more competitive products will push this trend further.

Traditionally, the Indian healthcare industry has not experienced significant spin-offs. However, there is a growing trend towards streamlining operations by focusing on core competencies. Recently, spin-offs in India have also been influenced by the trend of multinationals divesting non-core assets globally.

Spin-offs enable companies to unlock value by separating their core and non-core businesses. For example, in companies with a portfolio of both generic and specialty/innovative drugs, spinning off the generics business allows each entity to attract investors who are specifically interested in a certain business or sector, potentially leading to higher valuations.

In recent years, several notable spin-offs have occurred within the Indian healthcare industry. These have included spin-offs which have been driven by the overall global business strategies.

Spin-offs in India can be structured as a tax-free transaction at the corporate level and shareholders’ level, provided they are undertaken by way of a “demerger” and comply with prescribed conditions under the Income-tax Act, 1961 (the “IT Act”).

Some of the key conditions to be satisfied for a tax-neutral demerger are summarised below.

• All the property of the undertaking being demerged must become the property of the resulting company.
• All the liabilities related to the undertaking being demerged must become the liabilities of the resulting company.
• As a consideration for the demerger, the resulting company must issue its shares to the shareholders of the demerged company on a proportionate basis.
• The shareholders holding not less than three-fourths in value of shares in the demerged company must become the shareholders of the resulting company.
• The transfer of the undertaking must be on a going concern basis.

Further, in a demerger, the transfer of capital assets by the demerged company to the resulting company is not subject  to capital gains tax if the resulting company is an Indian company. Similarly, the issuance of shares by the resulting company to the shareholders of the demerged company is also not subject to tax as capital gains income.

Spin-offs in India can also be structured by way of itemised asset transfers or by way of a slump sale of a business. These spin-offs are however not tax-free under the domestic tax law and specific tax considerations apply to the buyer as well as the seller.

There is no restriction on a structure involving a spin-off immediately followed by a business combination, though tax considerations may make this inefficient. This strategy allows companies to create specialised entities and then combine them with similar businesses to leverage synergies.

Spin-offs can be structured in several ways based on the specific objectives of the transaction and the tax consequences. Some of the most common structures for spin-offs include the following.

• Demerger – this involves separation of the identified business unit into a separate entity.
• Slump sale – this involves the transfer of a business undertaking (including assets and liabilities) as a going concern for a lump sum consideration without specific values being assigned to individual assets or liabilities.
• Asset sale – this involves the transfer of identified assets (rather than an entire business unit). Unlike a slump sale, the buyer acquires selected assets (such as intellectual property or equipment).

A spin-off via demerger under the Companies Act typically takes 12 months, depending on the facts, complexity of the transaction and requirement for other regulatory approvals. In the case of spins-offs of listed companies in India, approval from the stock exchanges is compulsory. The stock exchanges are delegated this authority by SEBI in India in order for valuations and other requirements of law in connection with the transaction to be examined by the exchanges prior to granting approval.

A ruling from the tax authorities prior to a demerger is not required. However, as part of the statutory process, the Companies Act mandates that: (i) a notice be sent to the income tax authorities prior to the demerger being sanctioned by the relevant National Company Law Tribunal (NCLT); and (ii) any representations from the income tax authorities be conveyed to NCLT within a period of 30 days from the date of receipt of such notice. If the income tax authorities fail to respond within the given timeframe, it is presumed that they have no representations to make on the proposed arrangement.

It is not customary, and sometimes not desirable, to acquire a stake prior to making an offer to acquire a stake in a public listed company (particularly where an MTO may be triggered). Acquisition of shares/voting rights/control in a listed company in India is regulated by the SEBI through the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (the “Takeover Regulations”).

The Takeover Regulations require that if an acquirer (along with persons acting in concert (PAC) with the acquirer) is proposing to acquire 25% of more of voting rights in a public listed company, the acquirer must make an MTO for at least 26% of the total voting shares in the target company. Once above 25%, an acquirer (along with PACs with the acquirer) proposing to acquire 5% or more of voting rights in a financial year once again triggers the MTO requirements. The requirement to make an MTO may also be triggered if the acquirer acquires “control” of the target, irrespective of acquisition of shares/voting rights in the target.

As far as reporting is concerned, the Takeover Regulations require any acquirer (together with PACs with the acquirer) acquiring shares or voting rights in a target company aggregating to 5% or more of the shares of such target company to disclose their aggregate shareholding and voting rights in such target company.

It should be noted that the mere intention to undertake an indirect acquisition triggers the MTO requirements under Takeover Regulations. This is particularly relevant for global acquisitions of holding companies that trigger MTO requirements in downstream listed companies in India.

Where any person (together with PACs) holds shares or voting rights entitling them to 5% or more of the shares or voting rights in a target company, it is required to disclose the number of shares or voting rights held and change in shareholding or voting rights, if there has been change from the last disclosure made and such change exceeds 2% of total shareholding or voting rights in the target company.

The thresholds for an MTO are as follows:

• if an acquirer acquires “control” over a listed company; or
• if an acquirer (along with PACs) holds less than 25% of the total voting shares/rights in a listed company and such acquirer (along with PACs) proposes to acquire additional voting shares/rights in a listed company which would result in the acquirer (along with PACs) holding (in aggregate) more than 25% of voting shares/rights in a listed company; or
• if an acquirer (along with PACs) already holds 25% or more of voting shares/rights in a listed company and proposes to acquire or acquires additional voting shares/rights representing more than 5% of the total voting rights of a listed company in a financial year.

It is also pertinent to note that the acquisition of shares by any person, where the individual shareholding of such person acquiring the shares exceeds the thresholds mentioned above, shall trigger the obligation to make an MTO for acquiring shares of the target company irrespective of whether there is a change in the aggregate shareholding with PACs.

For acquisition of a public company in India, three options are typically available: (i) through cash, irrespective of whether securities are being acquired through primary or secondary mode; (ii) swap of shares, where the acquirer acquires the target company in lieu of shares by way of private arrangement; and (iii) a scheme of merger, where approval is required from the NCLT. In certain cases where the listed company has multiple business verticals and the acquirer is interested in acquiring identified business verticals, such verticals can also be acquired by way of a slump sale or asset sale.

In India, a merger is available as a structure to acquire a listed company. A scheme of merger is typically presented before the NCLT having jurisdiction over the acquirer and the target company. The entire process can take anywhere between nine to 12 months and requires approval from the shareholders as well as creditors of the target company. While the advantage of this route is that it generally exempts the acquirer from making an MTO, it is usually not preferred as it is time consuming and subject to multiple approvals and onerous conditions mandated under Indian securities laws.

Cash is a common mode of payment in transactions structured as mergers unless, for tax efficiency, the shares of the acquiring entity are issued to the shareholders of the merging entity.

In the case of transactions involving unlisted companies where the acquirer and seller are domestic parties, there is no minimum price requirement. Where the transaction involves a foreign party and a domestic party, exchange control regulations apply, as set out in 7.7. Currency Control/Central Bank Approval.

Where an MTO is triggered as a result of the direct acquisition of shares, voting rights or control of a target company, typically the offer price needs to be the highest of the following:

• the highest negotiated price per share under the agreement triggering the MTO;
• volume-weighted average price paid or payable for acquisitions, whether by the acquirer or any PACs, during the 52 weeks immediately preceding the date of the public announcement;
• the highest price paid or payable for any acquisition, whether by the acquirer or any PACs, during the 26 weeks immediately preceding the date of the public announcement;
• if the shares of the target are frequently traded, the volume-weighted average market price of shares for a period of 60 trading days immediately preceding the date of the public announcement, where the maximum volume of trading in the shares of the target company are recorded during such period; or
• where the shares are not frequently traded, the price determined by the acquirer and the manager to the open offer taking into account valuation parameters including, book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies.

In cross border transactions, fair valuation requirements based on prescribed valuation parameters exist which require the payment of a minimum price in the case of acquisitions by non-residents from residents and a maximum price in the case of acquisitions by residents from non-residents. In addition, outbound mergers (where the transferee or resultant entity is an entity outside India) are permitted only with specified foreign jurisdictions.

The Takeover Regulations do not permit the withdrawal of an MTO unless certain specific criteria are met. In the case of an MTO linked to the acceptance of a minimum threshold by the public, an acquirer can choose not to proceed with the MTO if the tender from the public does not meet that threshold (as specified in the MTO documents). Apart from the above, an MTO can be withdrawn on the following grounds:

• if a statutory approval which is required to close the transaction has not been received;
• if the acquirer, being a natural person, has died;
• if the SEBI is of the view that there is merit in the withdrawal of the MTO; or
• if any condition stipulated in the agreement for acquisition attracting the obligation to make the MTO is not met for reasons outside the reasonable control of the acquirer, and such agreement is terminated ‒ this is subject to the fact that such conditions should have been specifically disclosed in the detailed public statement and the letter of offer.

Typically, the acquisition of shares is documented through a share purchase agreement (in the case of a secondary transaction) and a share subscription agreement (in the case of a primary transaction). Schemes of mergers, demergers and amalgamation are documented through a scheme document, which sets out the various critical aspects of the transaction and is submitted to the NCLT along with an agreement which outlines the rights and obligation of the parties with respect to the transaction. A business transfer agreement or asset purchase agreement documents a slump sale or an asset sale (as the case may be). In a public listed company scenario, the share purchase agreement (or even a term sheet or letter of intent) could immediately trigger an MTO.

Whether a public company will give representations and warranties, and if given, what their scope will be depends upon the nature of the transaction. Where acquisition of voting shares/rights in a listed company by a secondary transaction triggers an MTO, the listed company may not even be a party to the share purchase agreement. Even where the target company is a party to the share purchase agreement, it may only give fundamental warranties (relating to authority and capacity to execute, and issuance of securities in accordance with applicable law). Listed companies are unlikely to give representations and warranties on behalf of the selling shareholders as (in most cases) the company is not a direct beneficiary of the transaction. For “control” deals, the acquirer rarely accepts that the remedy for breach of warranties lies against the company it has acquired.

Once the MTO is triggered (see 6.1 Stakebuilding), the acquirer (along with PACs) is required to make an offer for voting shares representing at least 26% of the voting share capital of the listed company. Shares tendered pursuant to the open offer must be mandatorily acquired unless the MTO is conditional on the tendering of pre-disclosed thresholds.

In the case of listed companies where an MTO is triggered, the proposed acquirer has the option to disclose, upfront, its intention to delist the company post-acquisition. The intention to delist is likely to encourage public shareholders to tender their shares in the MTO.

Thereafter, once the open offer process is concluded, the acquirer can proceed with share capital reduction. Subject to the approval of the NCLT and shareholders, the paid-up share capital of the target company can be further reduced.

The Companies Act also contains squeeze-out provisions as well as provisions for the acquisition of a minority shareholding, with the following key conditions:

• the majority shareholder must hold a certain percentage of the company’s shares (eg, 90% for acquiring minority shareholdings or 95% for a squeeze out);
• the acquisition must be made at a fair value or higher value;
• a notice must be served to the minority shareholders to whom the squeeze-out is addressed; and
• the acquisition must be completed within a specified timeframe.

Prior to triggering an MTO under the Takeover Regulations, the acquirer must ensure that firm financial arrangements have been made for fulfilling the payment obligations under the open offer and that the acquirer is able to implement the open offer. Typically, bank do not finance the acquisition of securities pursuant to an MTO. Section 6.5 Common Conditions for a Takeover Offer/Tender Offer sets out the conditions subject to which an MTO might be withdrawn. The lack of availability of funds does not qualify as one of such conditions, and an approval from the SEBI would be required in such a case.

Further, a certain percentage of the MTO has to be deposited in escrow or the acquirer has to provide a bank guarantee of that amount prior to launching the offer. Deposit of liquid listed securities may also be kept in escrow by the acquirer instead of depositing cash/providing bank guarantee as mentioned above.

In secondary transactions involving unlisted companies, the selling shareholders may provide various types of deal protection measures to demonstrate their bona-fide intent to close the deal. These include payment of break-fee, transfer of same or more favourable rights in the target, and non-compete restrictions.

In the case of the acquisition of a public company, the target company’s ability to provide deal protection measures is minimal, owing to the corporate governance requirement for listed companies. However, Takeover Regulations set out certain stand-still measures to ensure that the value of a listed target is preserved while the MTO process is ongoing.

A bidder who acquires a majority of the voting rights in a public listed company will obtain rights which are commensurate with its shareholding in the company. For example, a shareholder holding more than 50% of voting shares in a listed company can block special resolutions as well as ordinary resolutions.

Also, while a majority shareholder may nominate members to the board of directors of a listed company, such directors have a fiduciary duty towards the company and need to act in its best interest (and not only the shareholder nominating the director on the board). Accordingly, any arrangement between the listed company and the majority shareholder which is not in the best interest of the company but only serves the majority shareholder is likely to come under scrutiny. Any special shareholder rights, including the right to nominate directors, must be approved by the shareholders of the listed company.

In India, a significant number of companies (both listed and unlisted) are owned and controlled by an identified shareholder/promoter group. Assuming that the takeover is not hostile, the incoming acquirer would enter into a share purchase agreement with the promoter group triggering the MTO. The sale and purchase of shares under such agreement would take place once the acquirer has acquired the shares tendered as a part of the MTO or undertaken the primary acquisition under the agreement prior to the MTO by keeping 100% of the MTO deposited in escrow. In the event an MTO is triggered and the promoter group is not contracting to sell its stake, it is uncommon for the acquirer to enter into a binding commitment with the promoter group. Obtaining the support of the promoter group for a transaction could also trigger provisions related to PAC and, for this reason, agreements with the promoter group not selling its shares need to be carefully analysed bearing in mind the parameters of the deal.

The approval of the SEBI is not required for launching an MTO.

The MTO process typically includes the following key milestones.

• Making a public announcement to the SEBI and stock exchange on the date of agreeing to acquire shares or voting rights in, or control over, the target company.
• Within five working days of the public announcement, the acquirer is required to publish a Detailed Public Statement (DPS) in newspapers and also submit a copy to SEBI, after setting up an escrow account.
• Within five working days of publication of the DPS, the acquirer must file a draft letter of offer with SEBI for its observations. The letter of offer is dispatched to the shareholders of the target company after duly incorporating the changes indicated by SEBI, if there are any.
• The offer opens within 12 working days from the date of receipt of SEBI’s observations. The acquirer must issue an advertisement announcing the final schedule of the open offer, one working day before opening of the offer.
• The offer remains open for ten working days from the date of opening of the offer.
• Within ten working days after the closure of the offer, the acquirer makes payments to the shareholders whose shares have been accepted.
• A post offer advertisement, giving details of the acquisitions, is published by the acquirer within five workings days of the completion of payments under the open offer.

In the case of competing offers, the schedule of activities and the tendering period for all competing offers is identical. Further, the last date for tendering shares in acceptance of every competing offer is revised to the last date for tendering shares under the most recent competing offer.

If regulatory/antitrust approvals have not been received, the payment to the shareholders who tender their shares in the MTO can be delayed. However, SEBI has the power to direct the acquirer who has made an MTO but has delayed making payment of the consideration to shareholders, to pay interest at such rate as considered appropriate by the SEBI for the delayed period.

Please refer to 6.13 Securities Regulator’s or Stock Exchange Process for an overview of the process and timelines for an MTO.

Apart from the sector-agnostic laws which regulate various companies depending upon their activities (such as labour and environmental laws), there are specific laws regulating various elements of the healthcare industry. The key legislations applicable to healthcare industry are highlighted below.

Hospitals and Clinics

The laws regulating hospitals and clinics in India include the Clinical Establishments (Registration and Regulation) Act, 2010 and the Clinical Establishments (Central Government) Rules, 2012 and allied state legislations. These aim to regulate the registration of all clinical establishments in India and prescribe the minimum standards of facilities and services required to be provided by such establishments.

Pharmaceuticals and Medical Devices

Manufacture, storage and sale (including export and import) of drugs (including allopathy, ayurveda and homeopathy) and medical devices is regulated by Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945. While these form the umbrella legislation for medical devices, given the different function and use of medical devices, the Medical Devices Rules, 2017 were brought into force. These Rules provide a risk-based classification of medical devices and regulate their production, storage and sale (including export and import).

Separately, the Drugs (Prices Control) Order, 2013 regulates the prices of identified drugs and medical devices and is a key legislation aimed at ensuring the affordability of medicines.

SEBI is the primary securities market regulator for M&A transactions in India.

There are some sectors where foreign investment is either not permitted at all (eg, gambling) or only permitted above a certain threshold with the approval of the government (eg, defence, private security, multi-brand retail trading). More specifically, approval from the government is required where a person or entity who is a resident of a country which shares its land border with India (“Restricted Country”) is proposing to invest in an Indian company.

Investments into equity instruments (ie, equity shares and other instruments compulsorily convertible into equity shares) need to be reported to the Reserve Bank of India (RBI) through an Authorised Dealer Bank (ie, bank to whom certain authorities have been delegated). Where foreign investment has been made by way of primary subscription of securities in an Indian company, the company must report the investment in Form FC-GPR within 30 days of the receipt of investment. Where the foreign investment has been made by way of secondary acquisition of shares from a shareholder resident in India, the resident shareholder will need to report the transfer of shares to a non-resident acquirer in Form FC-TRS within a period of 60 days from the date of transfer/remittance of consideration.

In addition to the restrictions specified in 7.3 Restrictions on Foreign Investments, if a national of a Restricted Country is proposed to be appointed as a director on the board of an Indian company, the individual is required to obtain a security clearance from the Ministry of Home Affairs.

In India, approval from the Competition Commission of India (CCI) is not required if:

• the assets of the target company are less than or equal to INR4,500 million (approximately USD53 million); or
• the turnover of the target company is less than or equal to INR12,500 million (approximately USD146 million) (the “De-Minimis Exemption”).

Accordingly, a “combination” (ie, an acquisition, merger, or amalgamation) which breaches the prescribed thresholds and cannot avail any exemption, must be notified to and approved by the CCI.

Notably, a new criterion for notification was recently introduced, namely, a “deal value” threshold (DVT), in addition to the existing asset-value and turnover-based thresholds. The CCI will now be able to review combinations where: (i) the global deal value is in excess of INR20,000 million (approximately USD234 million); and (ii) the party acquired, taken control of, merged or amalgamated, has “substantial business operations in India”. Further, if a transaction is notifiable under the DVT, the De-Minimis Exemption will not be available.

The CCI, based on its analysis, must issue a prima facie opinion if it believes that the combination is likely to cause an “appreciable adverse effect on competition” (AAEC) in the specific industry within 30 calendar days or approve the combination directly, if there is no AAEC. In situations where a prima facie concern is raised by the CCI, it must issue its final view, ie, approving/ modifying/disapproving a transaction within 150 calendar days from the date of notification.

In addition to being mandatory, the CCI merger control regime is also subject to a “standstill” or suspensory obligation, ie, no part of the combination can be consummated until approved by the CCI. Recently, combinations involving open market purchases on a regulated stock exchange have been exempted from the standstill obligations, provided:

• the combination is notified to the CCI within 30 days from the date of first acquisition of shares; and
• the acquirer does not exercise any voting rights over such shares or securities (except in matters relating to liquidation/insolvency proceedings) or exercise any influence over the target company, until approval of the CCI is received.

Indian labour law is primarily divided into four codes:

• the Code on Wages, 2019;
• the Code on Social Security, 2020;
• the Industrial Relations Code, 2020; and
• the Occupational, Safety, Health and Working Conditions Code, 2020. 

The following aspects of labour laws would be considered crucial from the perspective of an acquirer, and are often subject to detailed due diligence:

• the payment of wages, bonuses, provident fund, gratuity and state insurance contributions to full time employees;
• if the target company has engaged contract labour, then it must comply with laws regulating payment and treatment of contract labour;
• in the case of trade unions, all pending or latest settlement arrangements with trade unions must be examined; and
• all pending and threatened litigations with present and past employees must be reviewed to assess the potential liability.

Engagement and discussion with the trade unions may be required in some cases depending upon the nature of settlement with the trade union and the type of transaction proposed.

The Indian rupee is fully convertible in current account transactions related to goods and services. However, the Indian rupee is not capital account convertible. It is still possible to bring in foreign capital or take out local money for these purposes. However, there are ceilings imposed by the government, and transactions beyond those thresholds require approval.

The Foreign Direct Policy (the “FDI Policy”) read with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 regulates foreign investments into India. Similarly, the Foreign Exchange Management (Overseas Investment) Rules, 2022 and the Foreign Exchange Management (Overseas Investment) Regulations, 2022 regulate overseas investment by Indian parties. For example, the FDI Policy provides that a non-resident cannot acquire shares of an Indian company either through primary investment or by secondary acquisition from a resident shareholder below the fair market value (FMV). Similarly, a non-resident cannot sell shares of an Indian company to a resident above the FMV.

The policy framework is enforced by the RBI along with other governmental authorities and, as set out in 7.3 Restrictions on Foreign Investments, certain sectors do require approval from the government as far as FDI is concerned. 

Digital Personal Data Protection Act, 2023 (the “DPDP Act”)

A key legal development impacting healthcare M&A in India has been the enactment of the DPDP Act, which regulates the processing of digital personal data, including medical records. 

Revised Schedule M of the Drugs and Cosmetics Rules, 1945

The Ministry of Health and Family Affairs introduced new Good Manufacturing Practices (GMP) for drugs being manufactured in India. The revised Schedule M mandates that pharmaceutical manufacturing premises must adhere to guidelines specifying the layout, design and construction of manufacturing facilities, as well as standards for equipment, utilities and quality control systems, with the aim of aligning drug manufacturing standards with global standards.

High Court of Delhi Facilitates Access to Affordable Treatment for Spinal Muscular Atrophy Disease

The High Court of Delhi allowed a major pharmaceutical company to produce a generic version of a drug used for treating Spinal Muscular Atrophy, despite a multinational pharmaceutical company holding a patent on the formulae involved in the drug’s production. The Court prioritised the need for the availability of affordable medication over commercial interests in its decision.

Implementation of the Uniform Code for Marketing Practices in Medical Devices

The Government of India has notified the Uniform Code for Marketing Practices in Medical Devices, 2024 (the “Code”). The Code provides a set of guidelines aimed at preventing unethical practices, and ensuring transparency, integrity, and accountability in the marketing of medical devices across India. This includes the prohibition on providing financial incentives to medical practitioners (in the form of sponsorships) except in narrowly identified cases.

In the case of transactions (such as investment, share sale, asset sale) involving a listed company, information and documents are typically shared with potential bidders as part of the due diligence process (including legal, tax and financial). As a rule of thumb, both companies and bidders are careful not to share, or be exposed to, unpublished price sensitive information (UPSI) to avoid them being tainted by such knowledge during the acquisition process. 

In the case of legal due diligence, it is customary to share information relating to the latest audited financials, corporate structure, material contracts, loans and borrowings, material litigations and regulatory compliance records (environmental and labour law compliances). For companies operating in the healthcare sector, information related to licenses, certifications, regulatory compliance (such as compliance with the Drugs and Cosmetics Act, 1945, Medical Devices Rules, 2017, etc) is also critical. Any information not already in the public domain and potentially being UPSI will either not be shared or be made public by disclosure to all shareholders. 

Companies typically provide the same information to all bidders to ensure a fair and transparent process. Additional information/documents shared with the bidders may vary depending on their specific requirements.

The key legal framework and regulations that govern data privacy in India and impact the due diligence of companies, including healthcare companies, are the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (the “SPDI Rules”) and the DPDP Act. However, as of 8 April 2025, the DPDP Act has not come into effect. The Government of India is expected to notify the effective date(s) in the near future, with different provisions potentially becoming effective on different dates. The DPDP Act, once notified and brought into effect, will replace the SPDI Rules.

The SPDI Rules govern the handling of sensitive personal data and information, which includes health data. These rules require companies to implement reasonable security practices to protect sensitive personal data and ensure that any disclosure or transfer of such data occurs with the individual’s consent and in compliance with legal standards. The sharing of sensitive health data as part of the due diligence process would require healthcare companies to ensure that their data handling practices comply with these security practices and that sensitive information is not improperly disclosed.

To mitigate privacy risks during the due diligence process, healthcare companies need to de-identify or anonymise personal health data before sharing it with potential bidders. This ensures that even if data is accessed during the due diligence process, it cannot be traced back to an individual, thus reducing the risk of breaching data privacy regulations.

In the case of transactions involving unlisted companies (both private and public), there is no requirement to make a bid public.

For listed companies, if a transaction triggers an MTO under the Takeover Regulations, the acquirer is required to make an offer to the public. The MTO process is briefly discussed in 6.1 Stakebuilding and 6.13 Securities Regulator’s or Stock Exchange Process.

A company (whether listed or unlisted) must issue a prospectus if it offers its shares or securities to the public through (i) an Initial Public Offering (IPO), (ii) Further Public Offer (FPO), (iii) Offer for Sale to the public, or (vd) any public issue of securities. In the case of public issue of securities, public means an offering to 200 or more persons in a financial year not including qualified institutional buyers.

A prospectus is not required for: (i) a private placement (ie, an offer made to a select group of persons (up to 200 in a financial year) for each type of security); (ii) a rights issue/bonus issue (where shares are offered to existing shareholders); or (iii) a preferential allotment (ie, an offer to select investors, though disclosures in explanatory statements and regulatory filings will be required). 

In India, a prospectus is not required to be issued for a stock-for-stock takeover offer or business combination, where unlisted companies are involved. For listed companies, if the proposed transaction triggers an MTO, then the acquirer is required to issue a letter of offer setting out the key details of the transaction (such as details of the buyer and the terms of the transaction).

In a transaction involving unlisted entities, bidders may be required to assure the company or the selling shareholders of their financial ability to complete the transaction. However, it is not necessary under law to produce financial statements/information as part of a transaction. This requirement depends on the structure of the transaction and the entity involved.

For listed companies, bidders are required to provide their financial statement as part of the MTO documents. Further, if a transaction (such as merger or demerger) is subject to the approval of tribunals, the financial information of the bidder is typically included as part of the scheme.

The financial statements of a company are required to be prepared in accordance with applicable accounting standards in India, such as Indian Accounting Standards (IndAS) or Generally Accepted Accounting Principles applied in India (Indian GAAP).

Transaction documents are typically not required to be filed with any governmental authority. However, in the case of a scheme of merger or demerger, the underlying scheme is filed before tribunals.

In the case of a business combination, directors continue to have fiduciary duties. The directors are required to ensure that a transaction is in the best interests of the company and its shareholders, while also considering potential impact on other stakeholders, such as employees and creditors.

In terms of applicable law, directors have a duty of care, whereby they are required to act with a degree of skill, diligence and care that an ordinary prudent person would exercise. This includes assessing the risks involved with the business combination, including any impact on the financial and operational aspects.

For unlisted companies, the Companies Act is the primary legislation governing the roles and responsibilities of a director. Further, in the case of a listed company, in addition to the Companies Act, directors must comply with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

In the case of private limited companies, the board and shareholders (in certain cases) need to approve business combinations and similar transactions. There is no legal requirement, nor is it common, for special or ad hoc committees to be constituted for this purpose.

For listed companies, certain committees may be constituted if an MTO is triggered. Please refer to 11.3 Board’s Role.

The board of directors is responsible for the overall management of a company, which includes overseeing business combinations such as acquisitions and disinvestments.

In relation to a listed company where an MTO is triggered, upon receipt of the detailed public statement, the board of directors of the target company is required to constitute a committee of independent directors to provide reasoned recommendations on the MTO, and the target company is required to publish such recommendations. The committee can also seek external professional advice prior to making recommendations.

While litigations initiated by shareholders challenging the board’s decision to recommend an M&A transaction are uncommon in India, the possibility of shareholder litigation can arise in the context of a business combination if the shareholders believe that the transaction does not maximise shareholder value or if there are concerns about conflicts of interest within the board, or a potential adverse impact on minority shareholders.

In transactions involving sale of a stake (minority or majority) or disinvestment of a business division, it is crucial to ensure that the transaction is carried out fairly, taking into account the interests of all stakeholders, including minority shareholders.

In the context of business combinations or a takeover, it is common for companies to seek independent advice from legal, tax and financial advisors. The advisors typically assist the board in evaluating a transaction structure which is compliant with the regulatory requirements. A number of transactions, especially cross-border transactions are subject to valuation from independent third parties (practising chartered accountant or merchant bankers). Please also refer to 11.3 Board’s Role.