Navigating Regulatory Hurdle in India’s Consumer Goods M&A

India’s consumer goods sector offers immense growth opportunities through mergers and acquisitions (M&A), but navigating regulatory hurdle is critical for senior leaders to ensure deal success. This article provides a comprehensive guide to the consumer goods market, recent regulatory developments, key challenges, and strategic solutions blending management, finance, legal, and technology perspectives to drive compliance and value creation.

Industry & M&A Overview: A Dynamic Consumer Goods Landscape Facing Regulatory Hurdle

India’s consumer goods market, valued at $220 billion in 2025, is a cornerstone of economic growth, projected to grow at a 7–9% CAGR. Key sub-segments include fast-moving consumer goods (FMCG, 50% of sales), direct-to-consumer (D2C) brands, food processing, home care, and consumer durables. M&A activity thrives, with deal types including strategic buyouts (e.g., large conglomerates acquiring regional brands), joint ventures (JVs) for local expertise, private equity (PE) investments in high-growth D2C ventures, and brand consolidations to reduce fragmentation.

• Structural Themes Shaping M&A Strategy Amid Regulatory Hurdle

1. Consolidation of Fragmented FMCG Brands: Large players acquire regional FMCG brands to expand market share and streamline operations, as seen in Hindustan Unilever’s portfolio integrations.
2. Digital Disruption in Consumer Behaviour: With 900 million internet users by 2025, e-commerce drives 11% of FMCG sales, pushing acquirers toward D2C brands with strong digital presence.
3. ESG and Compliance-Led Portfolios: Investors prioritise Environmental, Social, and Governance (ESG) compliance, influencing valuations and requiring robust regulatory adherence in M&A deals.

These trends amplify the need to address regulatory hurdle proactively to ensure seamless M&A execution.

1. Recent Regulatory Developments: Evolving Regulatory Hurdle in Focus

Regulatory hurdle in consumer goods M&A stem from an evolving framework overseen by multiple authorities. Key updates as of June 2025 include:

• Competition Commission of India (CCI): The Competition (Amendment) Act, 2023, effective September 2024, introduced deal value thresholds (DVT) of ₹2,000 crore for enhanced scrutiny, particularly for digital or regional dominance deals. Streamlined review timelines aim for efficiency, but complex cases face delays.
• FSSAI and Legal Metrology: Food processing and FMCG M&A require FSSAI licence transfers and compliance with the Legal Metrology Act, 2009, for packaging and labelling. Non-compliance risks significant delays.
• SEBI and DPIIT: SEBI’s updated guidelines ensure transparency in cross-border deal shareholding, while DPIIT allows 100% FDI in single-brand retail and food processing (automatic route) but caps multi-brand retail at 51% (government approval).
• PLI-Linked Compliance: The Production-Linked Incentive (PLI) scheme, with $1.46 billion for food processing, mandates production and export disclosures, impacting due diligence and valuations.
• Budget 2025: The 2025-26 Budget introduced tightened GST input credit rules, limiting post-merger claims on transferred assets, and adjusted import duties, affecting raw material costs for durables and home care. Capital gains tax rationalisation further influences M&A financial modelling.

These updates underscore the growing complexity of regulatory hurdle in consumer goods M&A.

2. Core Regulatory Hurdles in Consumer Goods M&A

The following regulatory hurdles frequently delay or derail M&A transactions, requiring proactive mitigation:

• FSSAI Licence Transfers and Packaging Compliance: Transferring FSSAI licences is complex, as they are product- and facility-specific, often requiring new applications. Non-compliant packaging (e.g., missing nutritional labels) creates bottlenecks, risking product recalls.
• ESG Compliance History: Investors scrutinise ESG records, including waste management and labour practices. Non-compliance, such as inadequate Extended Producer Responsibility (EPR) reporting, lowers valuations or halts deals.
• Legal Metrology Ambiguities: Integrating product portfolios reveals inconsistent Legal Metrology standards (e.g., weight declarations) across regions, necessitating costly re-labelling.
• CCI Approval Delays: Acquisitions creating regional dominance or consolidating brand clusters face extended CCI reviews, especially under DVT rules, delaying deal closure.
• GST Input Credit Inconsistencies: Budget 2025’s restrictions and varying GST input credit interpretations on transferred assets create financial uncertainty, impacting deal economics.
• Labour Law and EPR Liabilities: Asset sales inherit labour obligations (e.g., gratuity) and EPR liabilities (e.g., plastic waste management), posing unforeseen costs if due diligence is inadequate.

Addressing these regulatory hurdles demands a strategic, multidisciplinary approach.

3. Strategic Implications Through a Hybrid Consulting Lens: Overcoming Regulatory Hurdles

To navigate regulatory hurdles, leaders must integrate legal, financial, and technological strategies customised to consumer goods M&A.

• Legal & Regulatory Strategy

1. Build SOPs for Pre-Deal Audits: Develop Standard Operating Procedures (SOPs) for auditing FSSAI, EPR, GST, and labour law compliance before deals, identifying gaps early.
2. Structure Indemnities or Price Adjustments: Include clauses in agreements to address compliance gaps, such as pending FSSAI approvals, protecting acquirers from liabilities.
3. Secure Early NOCs: Obtain No-Objection Certificates from state food safety and environmental boards to streamline approvals and reduce delays.

• Deal Structuring and Valuation Strategy

1. Use Staggered Consideration: Tie earn-outs to regulatory clearances (e.g., CCI or FSSAI approvals), mitigating upfront risk and aligning seller incentives.
2. Adjust Valuation Multiples: Account for legacy non-compliance or litigation costs in valuation multiples to ensure realistic pricing.
3. Explore Minority Investments: Start with minority stakes and call options to test compliance alignment, reducing risk before full acquisition.

• Technology & Compliance Integration

1. Deploy Regulatory Dashboards: Use dashboards to track approvals and licences in real time, flagging potential regulatory hurdles across FSSAI, CCI, and GST frameworks.
2. Leverage AI for Risk Mapping: Apply AI to analyse compliance risks across SKUs and geographies, prioritising corrective actions post-merger.
3. Ensure ERP Compatibility: Implement unified ERP systems to track EPR and GST obligations seamlessly, minimising integration costs.

These strategies convert regulatory hurdles into manageable risks, enhancing M&A execution.

Illustrative Examples of Tackling Regulatory Hurdles

• FMCG Consolidation: A multinational acquiring a regional detergent brand faced delays due to missing Legal Metrology registrations across multiple states. Advisors restructured the deal with a two-phase payment: an initial tranche post-CCI approval and the final payment after licence transfers, resolving a key regulatory hurdle within six months.
• D2C M&A Deal: A ₹100 crore D2C acquisition stalled when due diligence revealed ESG reporting gaps in sustainable sourcing. Compliance teams implemented a corrective action plan, including supplier audits and transparent reporting, satisfying investors and enabling deal completion.

Conclusion: Turning Regulatory Hurdle into Strategic Wins

India’s consumer goods sector offers unparalleled M&A opportunities, but regulatory hurdle ranging from FSSAI compliance to CCI approvals and ESG scrutiny demand a proactive, tech-enabled approach. By integrating robust SOPs, innovative deal structuring, and AI-driven compliance tools, senior leaders can navigate these challenges, accelerate deal timelines, and unlock sustainable value. Partnering with experts like LawCrust ensures compliance becomes a strategic asset, driving M&A success in this dynamic market.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

For expert legal help, please contact us:

• Email: inquiry@lawcrustbusiness.com