Cross-Border M&A in India

Something unusual happened to cross-border M&A in India in 2025. Deal value roughly tripled. The numbers ran to about US$33.2 billion, up around 155% from the near-US$13 billion the year before (EY India, 2025), and the money did not come from where seasoned deal-watchers expected. A leading Japanese banking group put roughly US$4.4 billion into an Indian non-banking financial company. Another sank about US$1.6 billion into an Indian private-sector bank. Treat those figures as approximate, rounded to the nearest headline. The direction of travel, though, was unmistakable: foreign capital wanted in, and it wanted in through the merger-and-acquisition door.

Then came the quieter story, the one that finance and legal professionals kept flagging to each other. A wave of Indian-origin startups began doing the opposite of what a decade of founders had done. Instead of setting up a holding company in Singapore or Delaware and chasing dollars offshore, an Indian stockbroking unicorn, a payments major, a quick-commerce firm, and a furniture e-tailer started “reverse-flipping.” They re-domiciled their parent entity back to India, folding an overseas holding company into an Indian one through an inbound cross-border merger routed through the National Company Law Tribunal (the NCLT). The trigger, in most cases, was a domestic IPO. You cannot easily list in Mumbai when your parent sits in the Cayman Islands. And for the first time, the Indian public market was deep enough, and the valuations rich enough, that founders wanted to. The offshore flip that once looked mandatory had started to look like a liability.

Here is the tension that runs underneath both stories. The door swings inward far more easily than it swings out. Bring a foreign company into India, and the tax code, the corporate law, and the Reserve Bank of India (the RBI) all cooperate. Try to take an Indian company out, merging it into a foreign entity, and the same machinery quietly withholds the reliefs that make the deal worth doing. Very few outbound mergers have actually completed since the rules came into force. That asymmetry is not an accident, and understanding it is what separates a professional who can structure a cross-border deal from one who merely reads about them.

Every single deal in that 2025 surge, inbound acquisition and reverse-flip merger alike, ran through the same regulatory stack. The Foreign Exchange Management Act. The FDI route decision, automatic or government approval. The RBI’s deemed-approval regime for mergers. NCLT sanction under the Companies Act. Indian tax law, with its indirect-transfer trap and its one-sided neutrality. And, where a listed company or a large turnover is involved, the SEBI takeover code and the Competition Commission of India. Learn that stack end to end and you hold a scarce, dollar-marketable capability, because the professionals who can actually run it are rarer than the deals that need them. This is the map.

Cross-border M&A in India is a merger, acquisition, or share transfer between an Indian company and a foreign company. It is governed by the Foreign Exchange Management Act, 1999 and the Non-Debt Instruments Rules, 2019 for FDI, the RBI Cross Border Merger Regulations, 2018 for deemed approval, Section 234 of the Companies Act, 2013 with NCLT sanction, plus Indian tax and SEBI rules.

Here is what actually governs a cross-border deal in India, and where the rules trip people up. The sections below move from the core concepts through each regulatory pillar to the practical decision every deal team has to make.

What is cross-border M&A in India?

Ask five practitioners to define cross-border M&A and you will get five slightly different answers, because the term stretches across corporate law, foreign-exchange regulation, and tax. At its simplest, a cross-border M&A deal in India is any transaction in which an Indian company and a foreign company combine or change hands, and money or shares cross a national border in the process. The border is what pulls in the extra layer of rules. A purely domestic acquisition answers to the Companies Act and SEBI. A cross-border one answers to those plus the entire foreign-exchange regime built on the Foreign Exchange Management Act, 1999.

Merger, acquisition, and share transfer: the three deal forms

Three deal forms sit under the cross-border label, and they are not interchangeable. A merger fuses two companies into one surviving entity through a court-sanctioned scheme. An acquisition leaves both companies standing but transfers control, usually by buying a majority of shares. A share transfer is the narrower mechanical act of moving shares from a non-resident to a resident or the other way around, which is how most acquisitions actually execute on the ground. If you want the plain-English version of how these forms differ from one another and from an asset sale, our explainer on the difference between a merger, an amalgamation and a slump sale is the right primer to read alongside this one.

Why does the distinction matter so much? Because each form triggers a different approval path and a different tax outcome. A statutory merger needs NCLT sanction and can, if inbound, carry capital-gains neutrality. A share acquisition skips the tribunal entirely but exposes the seller to capital gains and, in offshore structures, to the indirect-transfer rule. Get the form wrong and you can convert a tax-neutral reorganisation into a fully taxable event.

The five regulatory pillars in one view

Think of a cross-border deal as passing through five gates. The first is FEMA and the FDI regime, which decides whether foreign money can enter this sector and by which route. The second is the RBI Cross Border Merger Regulations for the merger mechanics. The third is the Companies Act and the NCLT for the corporate sanction. The fourth is Indian tax law. The fifth applies only sometimes: SEBI’s takeover code when the target is listed, and the Competition Commission of India when the deal is large enough to affect market concentration.

Most competitor guides cover one or two of these gates and stop. What is underappreciated is that the professionals who actually close deals hold all five in their head at once, because a structure that clears the FDI gate can still fail at the tax gate. That is the whole reason this guide walks through every pillar rather than the popular ones.

FDI vs FPI vs FII, and FDI vs ODI: which regime governs which direction

New entrants confuse these acronyms constantly, and the confusion is expensive. Foreign Direct Investment (FDI) is a lasting, control-oriented stake in an Indian company, and it is the regime that governs almost all inbound cross-border M&A under the Non-Debt Instruments Rules, 2019. Foreign Portfolio Investment (FPI) is passive, market-traded investment in listed securities, subject to lower caps per investor and a different rulebook; the old term Foreign Institutional Investor (FII) was folded into the FPI framework years ago. For an acquirer taking control, FDI is the operative regime, not FPI.

Direction matters too. FDI governs money coming into India. Overseas Direct Investment (ODI) governs an Indian party investing abroad, which is the regime an outbound merger or an overseas acquisition engages. So an inbound deal is an FDI question, and an outbound deal is an ODI question, and mixing them up sends you to the wrong set of forms.

In practice, what experienced professionals watch for here is a vocabulary trap. A client will say “we are doing an FDI deal” when they mean a portfolio purchase, or call an ODI transaction an “acquisition” without registering that a completely different reporting chain applies. Pin down the direction and the control intent before you touch a single form. A quick historical note also clears a common query: FEMA replaced the older Foreign Exchange Regulation Act (FERA) in 1999, shifting India from a “prohibited unless permitted” stance to a management framework, and the Non-Debt Instruments Rules of 2019 in turn superseded the earlier TISPRO regulations of 2017 as the modern FDI rulebook. For the broader landscape of how these deals fit together, this mergers and acquisitions in India overview is a useful companion read.

The pitfall that catches teams most often is assuming the FDI rulebook is static. It is not. Sectoral caps and route classifications shift with each press note, so a route that was automatic last year may need approval this year, or the reverse.

Inbound vs outbound cross-border mergers

The single most consequential fork in a cross-border merger is direction. Which company survives the merger, the Indian one or the foreign one? Everything downstream, the RBI treatment, the tax bill, the practical feasibility, turns on that answer. And the two directions are not mirror images. One is a well-trodden path; the other is a legal cul-de-sac that looks open on paper.

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Inbound merger: foreign company into Indian company

An inbound merger is one where a foreign company merges into an Indian company, and the surviving entity is Indian. This is the common, workable direction, and it is the route the entire reverse-flip wave has used. When a startup collapses its Cayman or Delaware parent into its Indian operating company, that is an inbound cross-border merger. Under the Foreign Exchange Management (Cross Border Merger) Regulations, 2018, such a merger is deemed to have RBI approval provided the scheme complies with the regulations, which removes what would otherwise be a separate, slow approval step.

The inbound direction works because Indian law was built to encourage it. The corporate sanction comes through the NCLT, the foreign-exchange side is handled by deemed approval, and the tax side, crucially, offers neutrality. That combination, in practice, is the single clearest reason inbound deals close and outbound deals mostly do not.

Outbound merger: Indian company into foreign company

An outbound merger reverses the flow. The Indian company merges into the foreign company, and the surviving entity is foreign. Section 234 of the Companies Act permits this, and Section 234 of the Companies Act, 2013 was the provision that first made outbound mergers legally possible in India when it was notified. On paper, an outbound merger enjoys the same deemed-approval treatment as an inbound one if it complies with the 2018 regulations.

So why are outbound mergers almost non-existent in practice? Because “permitted” and “workable” are different things. The tax code does not extend capital-gains neutrality to outbound mergers, the NCLT process has no statutory deadline, and there is genuine ambiguity about whether related structures like outbound demergers are even allowed. The full tax explanation sits in the tax section below, but the headline is simple: the reliefs that make an inbound merger attractive vanish the moment the Indian company is the one dissolving.

Inbound merger vs inbound acquisition: process and tax differences

A question that trips up even experienced teams is the difference between an inbound merger and an inbound acquisition, since both bring foreign involvement into an Indian company. A merger is a statutory fusion sanctioned by the NCLT, producing one surviving entity and, when qualifying, tax neutrality. An acquisition is a share purchase that leaves the target intact, needs no tribunal, and triggers capital gains for the seller. The merger is slower but can be tax-neutral; the acquisition is faster but taxable.

The comparison below is the one to keep handy.

One more nuance surfaces for resident shareholders in an outbound merger. When an Indian shareholder ends up holding foreign shares, the remittance and the holding fall under the ODI framework rather than the Liberalised Remittance Scheme (LRS) in most structured deal contexts, and the two carry different limits and reporting. Getting that classification wrong is a classic outbound-merger stumble.

FDI routes: automatic vs government approval

Before any inbound cross-border deal moves, one question decides its whole timeline: can the foreign investment come in without asking permission first, or does it need prior government clearance? This is the automatic-versus-government-route decision, and it is the most common thing readers get wrong because they assume the answer is about deal size. It is not. It is about the sector and the source of the money.

The automatic route: no prior approval, post-facto reporting only

Under the automatic route, foreign investment enters without any prior approval from the government or the RBI. The investor completes the transaction and then files the required reports after the fact. The great majority of sectors sit on the automatic route, which is precisely why India’s FDI regime is described as liberalised. The governing rulebook here is the Non-Debt Instruments Rules, 2019, read with DPIIT’s Consolidated FDI Policy, which together set out the entry routes and sectoral conditions.

The automatic route is fast, but “no prior approval” does not mean “no compliance.” The reporting obligations that follow, which the FEMA reporting section covers in detail, are mandatory and time-bound. Miss them and the automatic-route advantage evaporates into a contravention.

The government (approval) route: FIFP filing and sectoral triggers

Some sectors require prior government approval before a rupee can move. Investment in these sectors goes through the Foreign Investment Facilitation Portal (FIFP), where the proposal is filed and the relevant administrative ministry reviews it. Sectors that commonly trigger the government route include defence above the automatic cap, print and digital media, multi-brand retail, and certain telecom and broadcasting activities. A handful of sectors, such as lottery, gambling, and atomic energy, are prohibited outright.

Worth flagging: the government route is not just slower, it is discretionary. The FIFP process weighs national-interest considerations, so approval is not guaranteed even when the paperwork is perfect. In practice, the mistake we see most often is a deal team treating a government-route filing as a formality, the way an automatic-route filing effectively is, and then losing weeks to a query it did not budget for.

How to tell which route applies to your deal

So how do you actually work out which route governs your deal? The logic runs in a fixed order. First, check whether the investor or its beneficial owner is from a land-bordering country, because that overrides everything and pushes the deal to the government route under Press Note 3 (covered later). Second, check whether the target sits in a prohibited sector. Third, check whether the sector has a cap or condition requiring approval. If none of those bite, the deal is automatic-route, and all you owe is post-facto reporting.

A recurring point of confusion is the split between FIFP approval and RBI reporting, and who approves what. The FIFP handles the pre-investment approval where one is needed; the RBI’s role, channelled through the authorised dealer bank, is the post-investment reporting layer. They are sequential, not alternatives. In practice, the mistake we see most often is a team filing FIRMS reports diligently while forgetting that their sector needed FIFP clearance before the money ever moved.

The RBI Cross Border Merger Regulations, 2018 and deemed approval

For years after Section 234 was written into the Companies Act, cross-border mergers sat in limbo, legally permitted but operationally impossible, because no one knew what the RBI would require. That changed in 2018. The Cross Border Merger Regulations, 2018 finally operationalised the merger route by answering the practical question every deal team was asking: do we need to file a separate application with the RBI for every cross-border merger? The answer, elegantly, was usually no.

What “deemed approval” actually means

Deemed approval is the mechanism at the heart of the 2018 regulations, and it is widely misunderstood. It does not mean the RBI blesses your specific deal. It means that if your merger scheme complies with the conditions set out in the regulations, then RBI approval is treated as already given, automatically, without a separate application. Compliance equals approval. You do not queue for a decision; you meet the conditions and proceed.

This is a genuinely elegant piece of regulatory design, because it converts a discretionary approval into a rules-based one. The deal team’s job shifts from “persuade the regulator” to “comply with the checklist,” which is far more predictable. The catch? The conditions are specific, and falling outside them throws you back into the slow, discretionary world. The practical reality is that the whole game, on the RBI side, becomes reading those conditions closely enough to stay inside them.

Conditions for deemed approval

The regulations attach conditions to the deemed-approval benefit, and they differ by direction. For an inbound merger, the resultant Indian company must comply with the FDI rules, any guarantees or borrowings taken over from the foreign company must conform to Indian external-commercial-borrowing norms within a set window, and valuation must follow internationally accepted principles. For an outbound merger, the resident shareholders who receive foreign securities must hold them within the permitted overseas-investment limits, and any Indian office of the foreign company must be dealt with under branch-office rules.

A cross-reference matters here. The 2018 regulations dovetail with Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, which is the procedural provision that ties the RBI approval requirement into the NCLT scheme process. The two instruments are read together; the merger section that follows walks through how.

When you still need actual RBI approval

Not every structure fits inside the deemed-approval box. If a scheme departs from the conditions, say the valuation methodology does not meet the standard, or the borrowings cannot be conformed within the window, then the merger no longer enjoys deemed approval and requires a specific, prior application to the RBI. This is the fork most teams want to avoid, because it reintroduces exactly the discretion and delay the 2018 framework was built to remove.

Based on what practitioners report, the smarter approach is to design the structure to fit within deemed approval from the outset rather than to file the scheme and hope. Reverse-engineering compliance after the NCLT petition is drafted is how deals lose months.

Companies Act and the NCLT process: Sections 230-234 and Rule 25A

A cross-border merger is not just a foreign-exchange event; it is a corporate restructuring that must be sanctioned by a court-like tribunal. That is where the Companies Act, 2013 and the NCLT come in. This is the pillar that most often decides whether a “clean” structure actually completes on time, because the tribunal, not the RBI, is where cross-border mergers go to wait.

Section 234 and Rule 25A: the enabling provisions

The enabling architecture has three moving parts. Sections 230 to 232 of the Companies Act set out the general scheme-of-arrangement process for any merger or amalgamation. Section 234 extends that machinery to cross-border mergers specifically, and Rule 25A of the CAA Rules supplies the procedure, including the requirement of prior RBI approval. To place this in time: FEMA replaced FERA in 1999, Section 234 and Rule 25A were notified in 2017, and the RBI’s operationalising regulations followed in 2018. Three milestones, spread over nearly two decades, before the route was fully usable. That slow build is why cross-border merger practice still feels young.

The reader who wants the who-does-what version should note that the corporate approvals layer is typically run by the M&A lawyer who runs the NCLT approval, coordinating between the company, the tribunal, and the regulators.

The NCLT scheme-sanction process, start to finish

The scheme-sanction process moves through a fixed sequence, even if the timing is anything but fixed. First comes structuring and valuation: board approval, a registered-valuer or merchant-banker valuation, and confirmation that the structure fits the 2018 deemed-approval conditions. Next, the scheme is drafted under Sections 230 to 232 with Section 234 for the cross-border element, and the petition is filed with the NCLT. Then come regulatory and creditor notices, to the RBI, the Registrar of Companies, the income-tax authorities, the Official Liquidator, and, if listed, SEBI and the stock exchanges. Finally, the tribunal hears the petition, sanctions the scheme, and the order is filed with the Registrar to make the merger effective.

For readers who want to see how this cross-border flow maps onto a standard deal, it helps to first understand how a typical M&A deal moves from term sheet to close, then layer the NCLT and RBI steps on top.

Fast-track mergers under Section 233: the September 2024 expansion

There is a shortcut, and it got meaningfully wider recently. Section 233 provides a fast-track merger route that bypasses the full NCLT process for certain eligible mergers, relying on regional-director approval instead. Since September 2024, the fast-track route was expanded to cover a foreign holding company merging with its wholly-owned Indian subsidiary, which is exactly the shape many reverse-flip and group-simplification deals take. For those structures, the fast-track route can cut months off the timeline. Not every cross-border merger qualifies, but for the ones that do, this is one of the most useful recent reforms.

The NCLT delay reality

Now for the part the glossy deal announcements never mention. There is no statutory deadline for the NCLT to decide a scheme petition. None. A regular merger can sit on a tribunal’s docket for many months, and multi-year pendency is not unusual given bench backlogs (and this, more than any regulatory hurdle, is what quietly defeats otherwise clean schemes).

Why does that matter beyond mere inconvenience? Because the entire appeal of a cross-border merger is often its tax neutrality, and a merger that drags across financial years can strand the very reliefs it was structured to capture. The delay does not just test patience; it can defeat the deal’s economic purpose. This is the practical reason many teams choose a share acquisition over a statutory merger even when the merger looks cleaner on paper.

FEMA reporting and pricing for a cross-border deal

Here is where deals quietly go wrong. Not in the boardroom, and not before the tribunal, but in the reporting window afterwards, when a form goes unfiled and a clean transaction becomes a contravention. FEMA reporting is unglamorous, deadline-driven, and unforgiving, and it is exactly the kind of detail that separates a professional who can be trusted with a live deal from one who cannot. The operational backbone here is the RBI Master Direction on Foreign Investment in India, read with the reporting requirements under the NDI Rules.

The reporting forms mapped to the M&A lifecycle

Three forms carry most of the load, and each attaches to a specific moment in the deal. Form FC-GPR reports a fresh issue of shares by an Indian company to a foreign investor, the moment new equity is allotted. Form FC-TRS reports a transfer of existing shares between a resident and a non-resident, the moment ownership changes hands. And the Foreign Liabilities and Assets (FLA) return is the annual filing that reports a company’s foreign investment position. All of these are filed on the FIRMS portal through the Single Master Form (SMF), which is the unified online filing system the RBI built to consolidate what used to be a scatter of separate submissions.

The documents a deal typically needs for these filings include the valuation certificate, the board and shareholder resolutions, the share-transfer or allotment records, and a declaration from the authorised dealer bank. Assembling that package early is what keeps the reporting window from becoming a scramble.

Reporting deadlines

The deadlines are the part to commit to memory, because they are short and they do not move.

1. Form FC-GPR: file within 30 days of the allotment of shares to the foreign investor.
2. Form FC-TRS: file within 60 days of the transfer of shares or the receipt or remittance of funds, whichever is earlier.
3. FLA return: file annually by 15 July, reporting the position as at the end of the preceding financial year.

Miss the FC-GPR window and the consequences are covered in the penalties section, but the short version is that a late filing is a contravention that typically has to be regularised through compounding. It is a fixable mistake, but a costly and slow one, and entirely avoidable with a calendar.

FEMA pricing guidelines and who can certify valuation

Price is regulated, not free. FEMA pricing guidelines set a floor and a cap depending on the direction of the transaction: shares issued or transferred to a non-resident cannot be priced below the fair value, and shares transferred from a non-resident to a resident cannot exceed it. The principle is straightforward: no capital is to leak out of, or be over-extracted from, India through mispricing. Valuation must follow an internationally accepted methodology and be certified.

Who certifies depends on the instrument and the context. For most FDI pricing, a SEBI-registered merchant banker or a practising Chartered Accountant can certify the valuation of unlisted equity, while a registered valuer is required for certain scheme valuations. A common question deal teams raise is when a merchant banker is mandatory versus when a CA will do, and the practical answer is that the merchant banker is required where the pricing sits under capital-market or scheme rules, while the CA certificate suffices for routine unlisted-share pricing under FEMA. When in doubt, the higher standard is the safer call.

Listed vs unlisted target

The target’s listing status changes the mechanics. For an unlisted Indian company, pricing follows the FEMA fair-value rules and certification described above, and reporting runs through FC-GPR or FC-TRS. For a listed Indian company, market price and SEBI regulations enter the picture: pricing must respect the relevant SEBI-prescribed formula, and a large acquisition can trigger open-offer obligations under the takeover code (covered in the SEBI section). The reporting forms stay the same, but the pricing discipline and the parallel SEBI overlay make a listed-target deal materially more complex.

Tax in cross-border M&A: the indirect-transfer trap and the outbound asymmetry

If FEMA decides whether a deal can happen, tax decides whether it should. This is the pillar that reshapes structures, kills outbound mergers, and quietly determines how Indian cross-border deals actually get built. Miss a FEMA form and you pay a penalty; miss a tax point and you can convert a neutral reorganisation into a transaction that hands a large slice of the deal to the exchequer.

Indirect transfer under Section 9: the offshore-share rule

Start with the trap that catches offshore structures. Under Section 9 of the Income Tax Act, 1961, a transfer of shares of a foreign company can be taxed in India if those shares derive their value substantially from assets located in India. This is the indirect-transfer rule, the legislative response to the well-known dispute over an offshore acquisition of Indian telecom assets, and it means you cannot escape Indian capital-gains tax simply by selling the offshore holding company instead of the Indian one. If the offshore entity is essentially a wrapper around Indian business, India taxes the gain.

How is the gain computed? Broadly, the portion of the offshore share value attributable to Indian assets is brought to tax as capital gains in India, subject to the thresholds and attribution rules in the section and its explanations. The practical effect is that a deal team structuring an acquisition through a Mauritius or Singapore holdco has to test, early, whether the indirect-transfer rule bites, because it can turn a supposedly offshore deal into an Indian taxable event.

Inbound merger tax neutrality: Sections 47 and 72A

Now the good news, and it flows in one direction only. For a qualifying inbound amalgamation, Section 47 of the Income Tax Act, 1961 provides that the transfer of assets in the merger is not treated as a taxable transfer, so capital-gains tax does not arise on the amalgamation itself. Section 72A, in the same family of provisions, allows the accumulated business losses and unabsorbed depreciation of the amalgamating company to be carried forward and set off by the amalgamated company, subject to conditions. Together, these are the reliefs that make an inbound merger genuinely attractive: no tax on the reorganisation, and preserved tax attributes going forward.

The outbound asymmetry

Here is the differentiator competitors skate past. Those reliefs do not extend to outbound mergers. When an Indian company merges into a foreign company, the capital-gains neutrality of Section 47 and the loss carry-forward of Section 72A are not available, because the statutory language ties the reliefs to an amalgamation resulting in an Indian amalgamated company. Merge outward and the amalgamated company is foreign, so the conditions fail. This single asymmetry is the biggest reason almost no outbound mergers have completed in India: the deal that would be tax-neutral inbound becomes a taxable transfer outbound, and the losses that would have been preserved simply evaporate.

The downstream effect of this friction is subtle and worth naming, because most people miss it. Faced with an outbound tax bill that no relief softens, deal teams stop trying to run statutory outbound mergers at all and reach instead for share acquisitions and share swaps, which sidestep the merger-neutrality question entirely. Over time, that quietly reshapes the whole shape of Indian outbound dealmaking, pushing it away from the elegant statutory merger and toward messier but taxable-in-a-manageable-way acquisition structures. The law says outbound mergers are permitted; the tax code ensures the market rarely uses them.

GAAR, transfer pricing, and permanent-establishment risk

Three more tax layers ride along on any cross-border structure. The General Anti-Avoidance Rule (GAAR) lets the tax authority disregard an arrangement whose main purpose is to obtain a tax benefit and which lacks commercial substance, so a structure built purely to dodge the indirect-transfer rule invites scrutiny. Transfer pricing applies whenever associated enterprises on either side of the border transact, requiring that inter-company dealings be at arm’s length and documented. And permanent-establishment (PE) risk arises where a cross-border structure inadvertently creates a taxable business presence in India for the foreign entity, dragging its income into the Indian net.

Each of these is a place where a deal that looked clean on the FEMA side springs a tax leak, which is why, in our view, tax review belongs at the structuring stage, not after signing. The uncomfortable reality is that a structure signed before the tax analysis is done is a structure you may have to unwind.

SEBI takeover code and CCI approval: the extra layers

Two more regulators can enter a cross-border deal, and they do not care about your FEMA compliance one bit. If the Indian target is listed, SEBI’s takeover code applies. If the deal is large enough, the Competition Commission of India applies. Both are easy to overlook precisely because they only bite in specific situations, and both can stop a deal cold when they do.

SEBI SAST: when a listed target triggers an open offer

When the target is a listed Indian company, the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 govern how much of it an acquirer can buy before a mandatory open offer kicks in. The core triggers are threshold-based: acquiring 25% or more of the voting rights obliges the acquirer to make an open offer to public shareholders, and once above that band, further “creeping” acquisitions beyond the prescribed annual limit also trigger an offer. The logic is investor protection: if control is changing, public shareholders must get a chance to exit at a fair price.

For a foreign acquirer, this is a genuine cost and timing factor. An open offer means committing capital to buy out a slice of the public float, on top of the negotiated stake, which can materially change the economics of a listed-company acquisition. Notably, the most common misstep here is a deal team pricing only the negotiated block and forgetting the open-offer overhang, then discovering the real cost of control late in the model.

CCI: when the deal size triggers merger-control notification

The Competition Commission of India is the second overlay, and it turns on scale rather than listing. Where a combination crosses the prescribed asset or turnover thresholds, the parties must notify the CCI and secure clearance before closing, so the regulator can assess whether the deal harms competition. India has also introduced a deal-value threshold, so a transaction above a certain deal size with sufficient Indian nexus can require notification even where the traditional asset and turnover tests are not met, which is particularly relevant for high-value acquisitions of digital and startup targets. Is CCI approval always required? No, only when the thresholds are crossed, but for the large deals that dominate the headlines, it usually is, and it is a suspensory approval: the deal cannot close until clearance arrives.

Press Note 3 and land-border FDI: the 2020 rule and the 2026 easing

Of all the FDI rules, this is the one that has moved the most, and the one most likely to be described wrongly in older guides. Press Note 3 governs investment from countries that share a land border with India, and it has swung from a blanket restriction in 2020 to a partial easing in 2026. If you are reading a competitor page written before this year, the odds are good it describes a rule that has since changed.

Press Note 3 of 2020: prior approval for land-border FDI

In April 2020, at the height of pandemic-era anxiety about opportunistic takeovers of stressed Indian companies, the government issued Press Note No. 3 (2020 Series), now folded into DPIIT’s Consolidated FDI Policy. The rule was sweeping: any FDI from an entity of a country sharing a land border with India, or where the beneficial owner of the investment was situated in such a country, required prior government approval, regardless of sector or amount. It effectively removed the automatic route for that entire category of investors. The safeguard was deliberate, aimed at preventing quiet, cheap acquisitions of Indian businesses during a moment of market weakness.

The March 2026 easing

The blanket approach was always a blunt instrument, and in March 2026 it was refined. The easing came through Press Note No. 2 (2026 Series), which amended the 2020 policy rather than replacing Press Note 3 outright. Under it, an investor from a land-border country holding up to 10% beneficial ownership and not exercising control may now come in through the automatic route, subject to reporting the investment to DPIIT, so small, passive stakes no longer need prior clearance. The amendment also tied the beneficial-owner test to the definition under the Prevention of Money Laundering Rules, 2005, and set a 60-day processing window for proposals in specified manufacturing sectors, including capital goods, electronic components, and polysilicon and ingot-wafer manufacturing. The intent is to keep the anti-takeover guardrail for controlling stakes while removing needless friction for genuine minority investment.

Beneficial-ownership compliance in practice

The hardest part of Press Note 3 is not the rule, it is proving compliance, and this is where deals meet due diligence. Establishing whether a beneficial owner is situated in a land-border country requires tracing the investment’s ownership chain, which is precisely a legal due diligence in an M&A transaction task. Who bears responsibility for getting it right? Both sides carry exposure, but the Indian investee company and its authorised dealer bank are the ones that must satisfy themselves and the regulator that the investment is compliant, since they are the parties accountable under FEMA.

In practice, that means the Indian entity cannot simply take the investor’s word; it has to verify the ownership structure and document the diligence, because a Press Note 3 breach is not a paperwork slip, it is an unapproved investment. The uncomfortable reality is that “we did not know the beneficial owner sat behind a land-border entity” is not a defence the regulator has to accept.

Why outbound mergers rarely happen, and the reverse-flip wave

Circle back to the tension the opening flagged: the door swings inward far more easily than it swings out. Now that the tax, corporate, and foreign-exchange pieces are on the table, the reason becomes concrete, and it explains the single most interesting trend in Indian cross-border M&A right now. The outbound route is legally open and practically closed, and Indian companies are responding by moving in the opposite direction entirely.

The outbound paradox recap

Three forces combine to keep outbound mergers rare. The tax asymmetry is the biggest: no Section 47 neutrality and no Section 72A loss carry-forward, so the outbound merger is a taxable event with no relief. The NCLT delay is the second: no statutory decision timeline, so even a clean scheme can drag across financial years. And demerger ambiguity is the third and least discussed: the NCLT has issued conflicting orders on whether outbound demergers are even permitted under the current framework, leaving practitioners without a settled answer. Put those together and the rational deal team simply does not attempt a statutory outbound merger.

The reverse-flip wave

Here is the counter-current, and it is the headline story of 2024 to 2026. A growing number of Indian-origin startups that once “flipped” their parent company offshore, to a Singapore or Delaware holdco, are now “reverse-flipping” it back to India through an inbound cross-border merger. A stockbroking unicorn, a payments major, a quick-commerce firm, and a furniture e-tailer are among those that have re-domiciled or moved to do so. The driver is usually a planned domestic IPO: Indian public markets have grown deep and richly valued, and listing in Mumbai is far cleaner when the parent is Indian. The reverse flip runs through exactly the inbound-merger machinery this guide has mapped, which is why the route has suddenly moved from obscure to mainstream. For the deeper legal mechanics of the outbound side specifically, this analysis of cross-border regulations for outbound mergers is worth a read.

The outlook

What comes next? A few signals are worth watching, with the usual caution that regulatory forecasts age quickly. Reverse-flip activity is likely to keep normalising as more startups queue for domestic listings, which would make inbound cross-border merger a standard structuring tool rather than a novelty. Practitioners continue to lobby for outbound parity on Sections 47 and 72A, and if that reform ever lands, dormant outbound activity could finally materialise. And the Section 233 fast-track route, already widened in 2024, is a plausible candidate for further expansion to cover more deal types (the direction of reform has clearly been toward widening it, not narrowing it), which would chip away at the NCLT-delay problem. None of these is certain, but all three point the same way: toward a cross-border regime that is gradually easier to use, at least on the inbound side.

Choosing your deal structure: merger vs acquisition vs asset deal vs share swap

Everything so far leads to one practical question a deal team actually has to answer: given this specific transaction, which structure should we use? This is the decision competitors leave out, and it is the one that matters most, because the structure you pick determines the approval load, the tax bill, and the timeline all at once. There is no universally best route, only the best-fit route for a given set of facts.

The four routes compared

Four structures cover the field. A statutory merger under Sections 230 to 234 fuses the companies into one and, if inbound, carries tax neutrality, but it needs NCLT sanction and has no fixed timeline. A share acquisition buys control by purchasing shares, skips the tribunal entirely, and is the cleanest common path, but it is taxable for the seller and carries indirect-transfer risk on offshore structures. An asset or business acquisition buys a specific undertaking rather than the company, leaving unwanted liabilities behind, and is typically taxed as a slump sale without merger neutrality. A share swap pays in stock rather than cash, conserving capital, and runs largely under the automatic route subject to valuation, per the NDI Rules, with the merger-neutrality analysis under Sections 47 and 72A applying where a scheme is involved.

Share swap vs cash consideration

The choice between paying in shares and paying in cash is not just a financing question; it has real FEMA and valuation consequences. A share swap, where the acquirer issues its own shares as consideration, conserves cash and can defer some tax, but it lives or dies on valuation: both sides have to be valued on an internationally accepted basis, and the FEMA pricing guidelines apply to the shares issued. Cash consideration is simpler to price but consumes capital and crystallises the seller’s gain immediately. For a cross-holding or group-reorganisation deal, the swap is often the natural choice; for a clean third-party buyout, cash usually wins on simplicity. The better approach, in our view, is to let the tax and valuation analysis drive the consideration choice rather than defaulting to cash out of habit.

Penalties, compounding, and the common mistakes that stall a deal

The last pillar is the one no one wants to need, but everyone should understand: what happens when compliance slips. FEMA is a civil, not criminal, regime for most contraventions, which is reassuring, but it is not toothless, and the process of putting a breach right is where deals lose time and money. The operational reference for penalties and reporting sits in the RBI Master Direction on Foreign Investment.

FEMA contraventions and compounding

A FEMA contravention, a late filing, a pricing breach, a missed approval, exposes the contravening party to a penalty. The mechanism to regularise it is compounding: the party voluntarily admits the contravention and applies to the RBI, which fixes a compounding amount that settles the matter without prolonged proceedings.

Can most contraventions be compounded? Yes, the great majority of reporting and procedural breaches are compoundable, which is why compounding is a routine part of FEMA practice rather than an exceptional event. The cost is money and time, but the outcome is a clean slate. Based on what practitioners report, a deal that discloses and compounds early fares far better than one that hopes the lapse goes unnoticed, because the RBI treats voluntary disclosure more kindly than a contravention it has to discover.

The mistakes that actually delay deals

Which mistakes cause the most damage? In practice, a familiar handful recurs. Missing the FC-GPR 30-day or FC-TRS 60-day deadline is the most common, turning a routine filing into a compounding exercise. Breaching the pricing guidelines, issuing shares to a non-resident below fair value, is a close second and harder to fix. Overlooking Press Note 3 when a beneficial owner sits in a land-border country is a serious, sometimes deal-ending, oversight. And selecting the wrong FDI route, treating a government-route sector as automatic, stalls the deal until the FIFP approval is obtained after the fact, if it can be obtained at all. Each of these is avoidable with disciplined process, which is precisely why disciplined process is the scarce skill.

The skills gap this creates

And that scarcity is the quiet opportunity buried in this whole subject. Running the FEMA plus NDI plus NCLT plus tax stack end to end, correctly and on time, is a capability far rarer than the volume of cross-border deals demands, and it is exactly the sort of dollar-marketable, globally-relevant skill that lets an India-based professional work on international transactions from anywhere. For finance and legal professionals mapping a path into this work, building cross-border deal skills as an M&A analyst from India is a sensible next step, because the professionals who can navigate this regulatory stack are the ones deal teams fight to keep.

Frequently asked questions

What is cross-border M&A in India? Cross-border M&A in India is a merger, acquisition, or share transfer between an Indian company and a foreign company, where money or shares cross the border. It is governed by FEMA and the NDI Rules for the FDI side, the RBI Cross Border Merger Regulations for merger approval, the Companies Act with NCLT sanction, and Indian tax, SEBI, and CCI rules. The direction of the deal, inbound or outbound, changes almost everything downstream.

What is the difference between an inbound and an outbound cross-border merger? In an inbound merger, a foreign company merges into an Indian company and the surviving entity is Indian. In an outbound merger, an Indian company merges into a foreign company and the surviving entity is foreign. Both are permitted under the 2018 regulations, but inbound mergers get tax neutrality and outbound ones do not, which is why inbound deals are common and outbound ones are rare.

What is Press Note 3 of 2020 and which countries does it cover? Press Note 3 of 2020 requires prior government approval for FDI from any country sharing a land border with India, or where the investment’s beneficial owner is situated in such a country. It applies regardless of sector or amount. A March 2026 amendment eased it, allowing non-controlling investments up to 10% under the automatic route, but controlling stakes still need approval.

What is Section 234 of the Companies Act, 2013? Section 234 is the provision that legally enables cross-border mergers in India, both inbound and outbound, subject to prior RBI approval. It extends the general scheme-of-arrangement machinery of Sections 230 to 232 to mergers involving a foreign company. It was notified in 2017 and is read together with Rule 25A of the CAA Rules, which supplies the procedure.

Do I need RBI approval for a cross-border merger? Usually not as a separate application, thanks to the deemed-approval regime. If your merger scheme complies with the conditions of the RBI Cross Border Merger Regulations, 2018, RBI approval is treated as already granted, so no separate filing is needed. You only need a specific prior RBI application if the structure falls outside those conditions.

What is “deemed RBI approval” under the FEMA Cross Border Merger Regulations, 2018? Deemed approval means that compliance with the 2018 regulations is itself treated as RBI approval, removing the need for a separate application. The deal team meets a defined checklist of conditions rather than persuading the regulator on the merits. Fall outside the conditions and the deemed approval no longer applies, sending the scheme back to a discretionary RBI application.

What is the automatic route vs the government (approval) route for FDI? Under the automatic route, foreign investment enters without prior approval and is only reported afterward, which covers most sectors. Under the government route, prior approval is required through the Foreign Investment Facilitation Portal before the investment can proceed, which applies to sensitive sectors, sectoral caps, and land-border investors. The route is decided by the sector and the source of the money, not by deal size.

Is NCLT approval required for a cross-border merger? Yes, for a statutory merger under Sections 230 to 234, the National Company Law Tribunal must sanction the scheme. There is no statutory deadline for the tribunal to decide, so timelines can run long. Certain structures, such as a foreign holding company merging with its wholly-owned Indian subsidiary, can use the Section 233 fast-track route and bypass the full NCLT process.

What is Form FC-GPR and when must it be filed? Form FC-GPR reports a fresh issue of shares by an Indian company to a foreign investor. It must be filed on the FIRMS portal within 30 days of the allotment of those shares. Missing the deadline is a FEMA contravention that usually has to be regularised through compounding, so the 30-day window should be diarised at allotment.

What is Form FC-TRS and when is it required? Form FC-TRS reports a transfer of existing shares between a resident and a non-resident, in either direction. It must be filed within 60 days of the transfer or the receipt or remittance of funds, whichever is earlier. Like FC-GPR, it is filed on the FIRMS portal through the Single Master Form, and a late filing is a compoundable contravention.

What are the FEMA pricing guidelines for a cross-border share transfer? FEMA pricing guidelines set a floor and a cap based on direction: shares issued or transferred to a non-resident cannot be priced below fair value, and shares transferred from a non-resident to a resident cannot exceed it. The aim is to stop value leaking out of India through mispricing. Valuation must follow an internationally accepted method and be certified by a merchant banker, Chartered Accountant, or registered valuer as required.

How long does a cross-border merger take in India? There is no statutory timeline, which is the honest and frustrating answer. Because the NCLT has no deadline to sanction a scheme, a regular cross-border merger can take many months and sometimes years, depending on bench pendency. Eligible structures using the Section 233 fast-track route move considerably faster, which is a key reason to check fast-track eligibility early.

What penalties apply for FEMA non-compliance in a deal? FEMA contraventions attract monetary penalties, and because most are civil rather than criminal, they can be regularised. The standard mechanism is compounding, where the party admits the contravention and the RBI fixes a settlement amount. The cost is money and delay, but disclosing and compounding early is far cheaper than leaving a contravention unaddressed.

Cross-border merger vs share acquisition, which route is better? It depends on the goal. A statutory merger can be tax-neutral inbound but needs NCLT sanction and has no fixed timeline, while a share acquisition is faster and tribunal-free but taxable for the seller and exposed to indirect-transfer risk. For a reverse flip or full amalgamation, the merger fits; for a quick, clean acquisition of control, the share purchase usually wins.

When does the SEBI Takeover Code (SAST) trigger an open offer? The SEBI SAST Regulations, 2011 trigger a mandatory open offer when an acquirer of a listed Indian company crosses 25% of the voting rights, and again when creeping acquisitions exceed the prescribed annual limit above that threshold. The open offer lets public shareholders exit at a fair price. For a foreign acquirer, this is an extra capital and timing cost that must be built into the deal economics.

When does a cross-border deal need CCI (Competition Commission) approval? A deal needs CCI approval when it crosses the prescribed asset or turnover thresholds, or the newer deal-value threshold with sufficient Indian nexus. Where a threshold is crossed, the parties must notify the CCI and wait for clearance before closing, because the approval is suspensory. Smaller deals below the thresholds do not require notification.

What is the indirect-transfer rule under Section 9 of the Income Tax Act? The indirect-transfer rule under Section 9 taxes the transfer of shares of a foreign company in India where those shares derive their value substantially from Indian assets. It was the legislative response to a well-known dispute over an offshore acquisition of Indian assets. The effect is that you cannot avoid Indian capital-gains tax simply by selling an offshore holding company that sits on top of Indian business.

Why have almost no outbound mergers actually completed in India? Because the reliefs that make a merger worthwhile do not apply outbound. An Indian company merging into a foreign one gets no Section 47 capital-gains neutrality and no Section 72A loss carry-forward, so the merger becomes a taxable event with no relief. Add the open-ended NCLT timeline and unresolved demerger ambiguity, and rational deal teams choose acquisitions or swaps instead.

References

Official guidance and regulations

1. Section 9, Income Tax Act, 1961: income deemed to accrue or arise in India (indirect transfer, Explanation 5). Ministry of Finance (CBDT).
2. Sections 47 and 72A, Income Tax Act, 1961: amalgamation neutrality and loss carry-forward. Ministry of Finance (CBDT).
3. Consolidated FDI Policy. Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry.
4. Press Note No. 2 (2026 Series): easing of FDI norms for land-bordering countries (amending Press Note No. 3, 2020 Series). Department for Promotion of Industry and Internal Trade.
5. Rule 25A, Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (fast-track cross-border scope amended, effective 17 September 2024). Ministry of Corporate Affairs.
6. Section 234, Companies Act, 2013: merger or amalgamation of company with foreign company. Ministry of Corporate Affairs / Parliament of India.
7. The Foreign Exchange Management Act, 1999 (Act 42 of 1999). Parliament of India / Ministry of Finance.
8. Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Ministry of Finance (Department of Economic Affairs).
9. Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (Notification No. FEMA.389/2018-RB). Reserve Bank of India.
10. Master Direction: Foreign Investment in India (FED Master Direction No. 11/2017-18). Reserve Bank of India.
11. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Securities and Exchange Board of India.

Data and research

1. EY India: How selective investing shaped India’s M&A deals in 2025. EY India, 2025 (India cross-border M&A deal-value surge and reverse-flip wave).

This article is for educational purposes only and does not constitute professional, financial, legal, or immigration advice. For guidance specific to your situation, consult a qualified professional.