INDIA: An Introduction to Corporate/M&A: Bengaluru-based

Key Market Trends

The Indian economy continues to be in a bright spot despite global headwinds. Indian M&A increased by 37% in volume and 75% in value in 2024, while private equity deals increased by 24% in volume and 13% in value. Key trends affecting the Indian M&A space in the past year are set out below. 

Booming public markets

The driving factor for deal activity has been the vibrant Indian capital markets. This has resulted in an increased wave of pre-IPO investments, and a general heightened interest in mature and well-established businesses, in both traditional and what are known in India as “new age” sectors – ie, those largely reliant on technology and innovation.

Sectors on the rise

While manufacturing, commercial real estate, retail and IT continue to be evergreen sectors, we have seen increased interest in warehousing, data centres, healthcare, global capability centres (ie, the movement of support and other functions to India), infrastructure, financial services, higher education, electric-vehicles and automobiles/auto-components. South India has experienced remarkable growth in the real estate market, driven by the booming IT industry and a vibrant start-up ecosystem, while industrial real estate is on the rise in Tamil Nadu. Major global players in the pharmaceutical industry are looking to set up R&D facilities and manufacturing plants in the Southern part of India, including in Bengaluru and Hyderabad. The government of India’s push for manufacturing in India has resulted in

• the rise of a more strategic interest in the technology transfer and manufacturing space (India’s growing iPhone manufacturing capabilities are a prime example); and
• increased investment in chip manufacturing, given the government’s colossal USD10 billion outlay of incentives (with a planned further USD15 billion), both of which have enabled India to take advantage of the global push for a “China + 1” approach to supply chain logistics.

Further, in light of the recent liberalisation of foreign investment regulation in the insurance and space sectors, we expect more investor interest in these areas as well. Bengaluru in particular has firmly established itself as India’s leading hub for innovation and entrepreneurship, fostering a thriving ecosystem of start-ups, unicorns, and global capability centres. The city’s deep-rooted tech culture, backed by a strong talent pool and proactive regulatory support, has driven continuous growth in venture capital and private equity funding with investors showing increased interest across early, mid and late-stage start-ups. The city’s vibrant investment climate has also led to a surge in public listings, with start-ups and high-growth companies increasingly opting for IPOs to scale further.

Increased regulatory co-ordination and enforcement

Indian regulators are increasingly adopting a co-ordinated approach to ensuring compliance with both the letter and spirit of the law, with a view to safeguarding the interests of investors, consumers and other stakeholders. For instance, the RBI (India’s central bank) has been taking some tough positions with players in the banking, financial services and insurance sectors for non-compliances, encompassing KYC norms, fraud monitoring requirements and credit reporting. Also noteworthy are the steps SEBI (India’s securities and commodities regulator) has taken to ensure that investment advice is only provided by registered investment advisors. This heightened focus on compliance and governance has also pushed auditors and independent directors to step up their roles and act as true watchdogs on behalf of shareholders and stakeholders. The RBI, with a view to ensuring that it better navigates the Indian economy through COVID-19 and other global headwinds, has pursued monetary-fiscal policy co-ordination with the executive without diluting the RBI’s monetary policy independence.

Bids and schemes

Bidding processes are now routine for exits in mature companies, and sellers and buyers are more comfortable with the complexities of such processes. Additionally, companies are also now more open to court-approved M&A for equity based (non-cash) transactions.

Major Legislative Changes

The government of India has also been proactive in formulating a legal and policy framework that facilitates deal-making. Some key legislative changes that will likely be important for deal-making in the coming year are set out below.

Liberalisation of foreign investment regime

Foreign investment regulations (inbound and outbound) have been liberalised, various sectoral caps on foreign ownership percentages have been increased to 100% and government approval requirements have been removed for investment in certain sectors, including insurance and manufacturing of components and systems for satellites. Further, significant regulatory changes have been carried out to facilitate and enhance structuring options for cross-border M&A.

Change in the merger control regulations by the Competition Commission of India

India’s antitrust regulator has broadened its oversight, adopting a more proactive approach towards scrutinising transactions of substantial value. The updated regulations aim to bring high-value deals under closer review, where exemptions might have previously applied, ensuring such transactions’ broader market impact is effectively assessed. This shift demonstrates the growing commitment of the regulator towards fostering fair competition and strengthening regulatory enforcement in the M&A landscape.

New mechanisms for take-private transactions

India’s capital markets regulator has introduced a streamlined mechanism for delisting that allows promoters to directly buy out public shareholders, bypassing the more complex and time-consuming reverse book-building process. The new method aims to ease the delisting process by providing upfront price certainty, reduction in speculative volatility and facilitating smoother decision making.

Changes to the rumour verification framework

India’s securities regulator (SEBI) has introduced stricter obligations for large public listed companies to actively address market rumours and prevent undue share price volatility. Companies are now required to monitor speculation and provide timely clarifications, ensuring that all types of investors have equal access to accurate information. By reinforcing transparency and reducing uncertainty, these measures aim to create a more stable and informed trading environment.

Relocation of businesses to Indian markets

India’s capital markets are emerging as a preferred destination for both domestic and global businesses looking to establish or relocate their holding structures. This fact, coupled with favourable regulatory changes, including the facilitation of cross-border share swaps and streamlined merger processes, has resulted in a significant movement of holding structures back into India, in what are being labelled as “internalisations” and “reverse flips”. In the last year alone, we have seen three large unicorns relocate back to India, with more on the horizon. As this trend continues, businesses will need to navigate key commercial, legal and tax considerations before undertaking such relocation.

The Outlook for M&A in 2025

To conclude, we believe that the overall outlook for the Indian M&A market in 2025 is positive, driven by strong economic fundamentals, political stability, regulatory reforms, and growing investor confidence. While some challenges remain, the opportunities for both domestic and international deal-making are significant, particularly in key sectors such as manufacturing, healthcare, energy, real estate and technology.