Should Large enterprises in India look at today’s situation to capitalize for themselves, preying on the ones that have succumbed to the pressure; or come together to conserve what remains of ailing businesses and collaborate with them to get them to speed to sustain the value they created over the years or were close to achieve their goals this year?


We are up against unprecedented challenges at a very tricky time in the current setting of India’s economy. Already reeling under the worst recession of Indian history, GDP is set to dip to lows of 0% coupled with lowest ever bank’s credit offtake and nearly defunct NBFCs owing to defaults & scams. We are now forced to partially shut down our economy, prioritizing “Jaan hai to Jahaan hai” by favoring saving the lives of its residents and citizens. As of date, we cannot anticipate when will the economy get back to its normal course, and given we have already entered this crisis with a huge fiscal deficit with an impending amount to facilitate reforms, it is bound to take more than a year or two to get back to the growth mark of pre-COVID 19 era which was around 6.0%.

These aren’t normal times. The whole world is enduring its consequence at variable scale, some more than others, drastically impacting the economic outlook of all economies. This pandemic is unlike anything we have seen in over a century, putting the best of the best administrations to test. “It is said India reforms only in crisis,” Raghuram Rajan, the former governor of the Reserve Bank of India quoted in his article (April 2020). But does this situation warrant that the Government of India will have the necessary means to build the right monetary and fiscal policies in time to help its economy design itself to re-trace towards a steady growth? With a massive shock to trade, it’s certain that economy will have find its standing in Make-in-India Swadeshi movement not only to become a nearly self-reliant nation but capitalize the opportunity to become a reliable manufacturing source for the world, challenging China. Our economy sorely needs strong reform policies to help it grow to a self-sustenance level and capitalize the underlying potential to become a reliable global supplier. Quoting Arundhati Roy, “Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next,” and a chance for India, too.

indian GDP growth

Current scenario

COVID-19 is and will undoubtedly have a huge impact globally, courtesy of widespread slowdown in the market as many companies declared 90% drop in revenues in March-April 2020; and an annualized impact level could be around 30% to 50% in this year, followed by 20% in next year.

Developed economies like the United States of America, China, Germany, United Kingdom, etc. are slipping into recession with unemployment plummeting up to 30%. With many countries anticipating shutdown to extend till mid of 2020, the economy will be severely affected this year owing to lower revenues and in turn, much lower margins. While large enterprises and conglomerates in medicine & healthcare, FMCG, e-commerce and online grocery and online content sector have become the key economic players, small players are struggling to survive as large businesses channel funds to priority divisions.

However, small and medium enterprises (SME) in the non-essential sector face the brunt of this recession owing to liquidity crunch & dropping credit growth, no or less demand, strained supply chain, inventory destruction that could lead to defaults and eventual shutdown temporarily or permanently as not all will or can survive this adversity. Even the large enterprises in the non-essential sector have fallen prey to this outbreak, forcing them to opt to last resorts such as - lay-offs, salary cuts and shutdown of few units in turn adding to economic slow-down.

Quoting Chairman of SME body, “The negative sentiment is likely to be extended to the first quarter of the new financial year.” The impetus initiated by Government of India did offer welcome respite to industries adding to budget reliefs, but it is still inadequate relative to the quantum of downgrade. It is imperative that the government should embed reforms with more policies, tax and liquidity / credit to avert extreme situations.

Many companies won’t be able to sustain till fiscal and monetary stimulus measures kick in. Nevertheless, businesses, competitors or not, seeking growth or just looking to piggyback this crisis, are also evaluating different collaborative structures within or outside the industry as the road to survival with the optimism to overcome the economic fall as a unit.
On one hand where human gathering can be life-threatening, “businesses coming together” can prove to be life-saving for businesses than capitalizing on the fall of others. It will help companies to not only avert existential crisis but cooperation with competitors will support them in dealing with supply-chain challenges or potential future overcapacity. But this calls for relaxation and incentives to execute JV, mergers and acquisitions to facilitate quick decision-making.

What are the developed economies doing?

United Kingdom, France, Greece, Spain, Finland, Latvia, Luxembourg, Poland, Norway and Portugal have instituted changes, easing the strict collaboration compliances to fulfill increasing demand of goods due to COVID-19.

In UK, Competition and Market Authority (CMA) has permitted collaboration agreements between grocery chain suppliers, logistics service providers, NHS England with other NHS providers, and maritime operators. Further, the CMA has reassured that it won’t come in the way of collaboration amongst businesses that are necessary to protect the consumers in the present crisis.
The European Competition Network (ECN) members will not actively intervene against certain forms of cooperation necessary to ensure supply continuity. Similarly, the German Federal Cartel Office (an ECN member) has also shown potential flexibility in the application of competition law in times of crisis, at least regarding key economic areas such as food supply chains.

Other Competition Bureaus such as the Norwegian Competition Authority on 18th March 2020, announced three months exemption from competition law for two Norwegian airlines, allowing them to coordinate their schedules to maintain a minimum service during the crisis. In the USA, even the Federal Trade Commission (FTC) issued a joint statement to consider competitors collaboration, given the COVID-19 crisis in addition to the trillion-dollar relief to its citizens and much more. Ireland’s Competition and Consumer Protection Commission (ICCPC) has pledged that it will not actively intervene against necessary and temporary measures put in place in order to avoid shortage of supply.

While in India, one body that can contribute and offer strong support is Competition Commission of India (CCI). CCI can play a critical role in introducing transitory reforms to provide guidance and permit competitor’s collaborations to weather economic storms. CCI must issue a statement or regulation to slacken the competitor collaboration during the pandemic. While it is in the interest of conglomerates and larger enterprises to collaborate, it shall also be in the interest of SMEs to be merged with large enterprises to avoid the existential crisis. Irrespective of the fact that there might be a fall in the competitive scenario as well, the need of the hour is to stay afloat or capitalize before losing it all.

Undoubtedly the objective of the Competition Act, 2002 (the “Act”) is to create a healthy competitive market in the interest of consumers. However, the laws are framed for the interest of the people, which are subject to change with the changing times.

With the current status of NPA figures, dropping growth rate and low credit offtake it is certain that there will be further surge in NPAs & defaults in the quarters to come. Government can provide bailouts using the Public-Private Partnership (PPP) model, wherein Private sector can seek participation from PSUs to provide a considerable support and in turn PSUs can leverage private player’s human & physical capital, technology and innovation. Lest we be set to see a huge impact on Indian economy with dropping GDP (as per Figure 1) and unemployment leading to poor domestic spending & consumption, that contributes to 2/3rd of GDP. The banks will have no option but to offer support via easy loan processing with better safeguards to de-risk their assets along with lower margins to offer low interest rates. But for how long?

Indian loan growth rate

Suggested Measures to CCI

During these extraordinary times, the CCI might consider following suit to other Competition Bureaus to support businesses by issuing amended regulations to relax the competition law for collaboration structures and fast track the approval procedure for this period. Though mergers or new deals would be the least of the priorities for businesses, however, eased guidelines for mergers or collaboration could promote it which in turn can save many businesses and equally help the stewards to realize more value. This might also encourage MNCs to consider India as an attractive hub for market expansion. Government can appropriate monetary benefits to both entities such as offering large / medium enterprises that are buying loss making companies, with tax holiday for the company bought or fund the acquisition via moratorium and lower interest rate; whereas acquirees can be offered clear credit ratings. Banks can also be allowed to take stake in the company as additional collateral with certain limitations on the promoter’s rights to prevent exercising the reform for financial gains.

CCI could also design tailor made policies for the most battered sectors which were battling impact of recession such as travel & hospitality, transportation, finance, retails, textiles, engineering & construction, and other sectors who rely on raw material imports such as pharmaceuticals, healthcare, auto ancillary and more.

The jurisdiction can also recognize the possibility of “crisis cartels'' that are entered into to mitigate severe decline in sales or overstock such as Article 15(5) of China’s Anti-Monopoly law, or Article 101(3) of Treaty on the Functioning of the European Union (TFEU) which allows for some information sharing among competitors regarding oversupply and under supply so long as it “does not go beyond what is necessary to correct the market failure.” This shouldn’t be forgotten that any kind of dispensation is temporary in nature guided by CCI. Collaborations would support business sustenance which will help them in tackling the threat to business continuity and massive layoffs. Hence, any competitor collaboration is mainly in the interest of consumers to help them with smooth & continual supply of goods & services but also employment & earning for households.

With the current suggestions, caveats may be added to restrict beneficiary companies from excessive pricing or creating shortage in supply. Like, in order to counter the rampant price rise of some essential products such as hand sanitizers and face masks, the Government of India has already declared them to be included under the Essential Commodities Act, 1955 until June 30, 2020.

It is explicit that policies drawn out by CCI in tandem with government regulations can save more businesses before COVID-19 can cause steep roads into the Indian economy. Although, all the measures introduced or suggested will require time to make an impact but if done now, the next 12 months could really strengthen the Indian economy for next debate to become the power, Mr. Modi promised us. It’s not just in his hands to save the day but for all of us to contribute equally, just the way we are doing now by staying at home and becoming one voice to battle the virus as responsible Indian citizens.

Jai Hind!


Courtesy: Team Quants Advisory

Quants Advisory is a Business advisory company. Our service ensemble aims to advise organizations in revenue growth management, go-to-market, risk & compliance management, M&A, fund raise and business management.


April 15, 2020.