INDIA: An Introduction to Corporate/M&A: Mumbai-based
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2024 - A Triumphant Election Year
Introduction
Despite elections sweeping across various major jurisdictions, including the United States, the European Union, France, the United Kingdom and of course, India – 2024 has emerged as a resilient torch bearer for M&A deal activity.
After a cautious 2023, there has been a steady quarter-on-quarter resurgence in both private equity and strategic M&A in India, bolstered by the certainty and continuity ushered in by Prime Minster Modi’s third term.
The government has already signalled its intent to give impetus to M&A by executing a Bilateral Investment Treaty with the UAE in early 2024 and engaging in talks with large private players such as Tesla and other Silicon Valley companies. Emerging reports also hint at the introduction of a new policy framework for structuring foreign direct investment (FDI) through mezzanine debt, which may provide vital flexibility to attract foreign investment into India.
In its recent Global Macro Outlook 2025-26, Moody’s forecast 7.2% GDP growth for India in 2024, noting that the Indian economy is currently in “a sweet spot”. Moody’s emphasised the impact of India’s growing aggregate spending, increasing rural demand, rising capacity utilisation and continued focus on infrastructure on attracting private investment as well as growing the national GDP.
Business sentiment indeed has been positive, as evidenced by a reported 66% uptick in M&A (by deal value) in the first three calendar quarters this year, compared to the same period last year. While deal volume has shown a slight decline (by 3%), India has fared much better than its counterparts across the Asia Pacific (whose economies remain distorted by growing geopolitical tensions in Europe and the Middle East).
While private equity (especially foreign) players have been more selective in placing bets (favouring more resilient and stable sectors), overall PE-deal momentum has been strong. India has been able to capitalise on the mandates placed on private equity investors to build fund corpuses dedicated to emerging markets, including by edging out China in terms of government spending on physical and digital infrastructure and driving growth through a focus on ESG and business sustainability.
However, strategic M&A has taken centre stage in 2024 with some of the most seismic (both in terms of value and impact) deals in recent years, including: Reliance’s approximately USD8.5 billion merger with Disney India, QC Hospitals’ approximately USD5 billion merger with Aster DM, and Bharti Global’s approximately USD4 billion acquisition of a minority stake in the UK’s BT Group.
Once again, the TMT, healthcare, transport and infrastructure sectors have emerged as hotbeds for M&A activity, spurred in equal measure by the Indian government’s focused push for greater privatisation of these sectors and the growing consumer demand and steady spending power of the sizable Indian middle class.
In conclusion, the political and economic tailwinds created in 2024 are likely to continue to foster investment in the upcoming years, with the Indian government positioning itself as an intermediary for foreign investment.
Looking through the quarters
The first quarter of 2024 witnessed a notable surge in deal activity, recording over 400 deals with a value exceeding USD20.7 billion. Aside from the blockbuster Disney-Reliance merger, Brookfield-backed Data Infrastructure Trust also announced its acquisition of ATC’s Indian asset-base (valued at around USD2 billion) in Q1. While domestic M&A showed a decline in volume, cross-border activity witnessed its second-highest quarterly volume in the last five years.
The second quarter of 2024 reported around 470 deals aggregating approximately USD15.9 billion, reflecting a roughly 9% increase in volume since Q1. This quarter also saw the Adani group’s acquisitions in the industrial materials, ports and terminals segment (at a combined value of around USD3.2 billion). In aggregate, Q2, 2024 saw growth of about 19%, in terms of deal value and a 27% increase in volume, as compared to Q2, 2023.
Propelled by the results of the Indian union elections, Q3, 2024 witnessed the highest quarterly deal volume, since Q1, 2022, with over 600 deals reported. Q3, 2024 performed better than its 2023 counterpart in all major segments, marking an overall increase of over 40% in terms of deal value. Key strategic deals in this quarter were Bharti Global’s investment in the BT Group, and Mankind Pharma’s acquisition of Bharat Serums and Vaccines for approximately USD1.64 billion.
Navigating the regulatory landscape
M&A transactions in India often suffer from long lead-times (both in the execution and implementation phase) on account of complex and time-consuming regulatory compliances.
For example, the Indian government, in its continued effort to combat illicit activities such as money laundering and tax evasion, has introduced a multitude of disclosure and approval requirements linked to identifying the ultimate beneficial owner (UBO) of investment into India. From the infamous Press Note 3 of 2020 to more recent amendments to the Indian Companies Act (in the context of share acquisitions and director appointments) to government tender documents, every facet of M&A in India is burdened by uncertainties and delays caused by this hunt for the UBO.
While increased transparency and control over the source of funds funnelled into Inda, may prove valuable from a macro-economic and national security perspective, these measures do have the side-effect of discouraging legitimate investments (especially from foreign PE investors), particularly where confidentiality of ownership information is required for structural or security reasons.
That being said, in keeping with its efforts in 2023, the Indian government has also attempted to simplify and streamline the M&A regulatory framework in 2024.
Fast-track approval of reverse mergers
One such example, is the introduction of a fast-track merger route for reverse mergers into India (ie, mergers of foreign companies with their wholly owned Indian subsidiaries). Previously, all such mergers were subject to a drawn-out court-approved merger process. However, with the amendment, reverse flips can be implemented directly, on the basis of an approval from the central government (bypassing the court process).
With recent years witnessing significant instances of reverse flipping, such as those of PhonePe, Groww, and Pepperfry, this development is expected to bolster the trend (especially among start-ups keen to redomicile in India).
Cross-border share swap harmonisation
In a complementary development, the Reserve Bank has harmonised the position on cross-border share swaps under overseas investment and foreign direct investment laws. Pursuant to the amendment, both primary and secondary cashless transactions between Indian companies and their foreign counterparts are now permitted (including by way of swapping outward direct investment for FDI). This will allow Indian companies to expand their global reach and footprint, while maintaining a healthy balance sheet for their flagship domestic business.
This year also saw the Securities and Exchange Board of India (SEBI) roll out its rumour verification framework in the listed space, whereby the top 250 listed companies (by market cap) are now required to confirm, deny or clarify market rumours reported in the mainstream media within 24 hours, upon occurrence of a material price movement in their stock. While this measure may create a heightened risk of premature leaks in the media, SEBI has provided a mechanism for price protection upon verification of the rumour (through which the impact of a rumour on the stock price can be excluded from the transaction price).
Deal value threshold merger control regulation
Perhaps the most dreaded regulatory development of the year is the notification of a deal value threshold (DVT) merger control regulation in India. Going forward, all transactions with an aggregate value (ie, direct and indirect consideration, including deferred elements and earn-outs), exceeding INR20 billion (around USD240 million) will be subject to the scrutiny of the Indian antitrust regulator, the Competition Commission of India (CCI).
This move is intended to address gaps in the traditional asset and turnover-based thresholds, particularly in the context of “killer acquisitions” in the technology sector where players may have minimal physical assets or turnover (but a significant market impact). However, given that the DVT-approval requirement is sector agnostic, the amendment may result in inadvertent transactional reticence on account of increased uncertainties and gestation periods for all mid and large sized M&A deals.
Angel tax
Shifting focus to the most widely anticipated and appreciated regulatory development of 2024, the Indian government in its budget announced the abolition of angel tax (ie, a whopping 30.9% tax on premiums earned by Indian companies on the fair market value of their shares) on all classes of investors. This is a significant step towards revitalising the Indian economy (especially in the context of start-ups, which were hit hardest by the angel tax) and signals India’s willingness to reshape economic policy to suit the ever-dynamic business landscape.