MUMBAI: Despite an unusually turbulent geopolitical backdrop, India’s mergers and acquisitions (M&A) market is holding its own, with deal activity expected to sustain an annual run-rate of around $200 billion, split roughly equally between domestic, inbound and outbound transactions, according to Rajesh Singhi, global co-head, M&A Advisory, Standard Chartered Bank.
The global M&A landscape is a “tale of two halves,” said Singhi. In the United States and Europe, mega deals and domestic consolidation are dominating, with strategic players increasingly supplanting financial sponsors who had been the dominant force in recent years. In India, Southeast Asia and West Asia, energy transition and infrastructure are emerging as the primary drivers.
One of the more notable shifts flagged by Singhi was the resurgence of outbound acquisitions by Indian corporates. Sun Pharma’s overseas acquisition, announced recently, is being described as one of the largest ever by an Indian corporate and as a bellwether of this renewed appetite.
Three factors are driving this, according to Singhi: access to technology in a rapidly evolving manufacturing and industrial landscape; the restructuring of global supply chains, with near-shoring and on-shoring now a structural rather than cyclical trend; and the fact that some Indian companies, facing muted domestic growth, are looking outward to sustain their historical pace of expansion — backed by balance sheets that are “perhaps at their best ever.” Sectors seeing active outbound interest include pharmaceuticals, health care, electronic manufacturing services (EMS), and information technology (IT).
Within India, financial services continue to attract significant foreign strategic interest. Singhi pointed to the Emirates NBD-RBL Bank transaction as a strategic play distinct from the portfolio investments typically made by sovereign wealth funds. For West Asian investors, India often ranks as the most active market outside the US and Europe. They have consistently been large investors in India.
“If you are looking to invest in a country, financial services is perhaps the best proxy you can get into the GDP growth,” he said, noting that a 7-8 per cent GDP growth rate typically translates into 10-12 per cent growth for banks — a compelling proposition for long-horizon capital. Singhi also highlighted the wealth and asset management space as a hotbed of unicorn creation, driven by the structural shift of Indian household savings from fixed deposits to mutual funds and equities. “A lot of new unicorns are being created in this segment, which is attracting a lot of interest from sponsor capital,” he said.
On India’s persistently elevated valuations, a concern often raised by foreign strategic buyers, Singhvi said India has historically traded at 18-22 times price-to-earnings, underpinned by strong GDP growth, high return on equity profiles and a fundamental shift in market ownership toward domestic retail investors. “India is not a market which has ever traded at 10 or 12 times PE. It has historically traded at 18-22 times because of growth and return ratios,” he said.
At the same time, Singhi acknowledged that higher valuations can sometimes become a hurdle for strategic acquirers, especially if overseas buyers themselves trade at lower multiples.
Meanwhile, he said, the higher-for-longer interest rate environment is reshaping deal financing, with private equity sponsors stepping back somewhat and strategic investors coming to the fore. Singhi also pointed to a structural shift in the role of banks — increasingly as originators and distributors of capital rather than balance-sheet lenders, particularly for long-duration infrastructure transactions.
On the Reserve Bank of India’s (RBI) decision to allow domestic banks to participate in acquisition financing, Singhi said, “The Indian regulator has always been one or two steps ahead of the game. The fact that they have opened the sector up for banks to participate in means they have the confidence that the banking system is ready for it,” he said.
Source: Business Standard
