M&A Report 2023: India
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M&A Report 2023: India

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Clarence Anthony, Paulose M. Abraham and Tanuj Dayal, Trilegal

The Indian market remained stable in 2022, overall surpassing the country’s record-high M&A deal value as nearly 20 deals were completed, accounting for about $152 billion. The year was also marked by some of the biggest domestic transactions in the civil aviation, cement, and pharmaceutical industries. Domestic M&A transactions dominated with a total of 355 deals, while outbound transactions aggregated 61 deals.

Notably, deal activity saw a relative slowdown in the second half of the year as compared to 2021. This is attributable to rising inflation costs, geopolitical unrest, and looming signs of a global recession. Outbound M&A deals reached a four-year high in 2022. Biocon Biologics Limited's acquisition of the Biosimilars Business from Viatris Inc. is the largest outbound acquisition by an Indian company in the US healthcare sector. While 22 Indian start-ups achieved ‘unicorn’ status, the number dwindled from last year, showing early warning signs of the funding winter.

Therefore, 2022 saw lower deal volumes despite higher deal values as compared to the previous year. The emerging technology sector continued to dominate the deal-making space, which was similar to the trends seen in the past year. Domestic Indian entities have been active in the M&A deal space with the Adani group acquiring cement companies (ACC and Ambuja), coal and mining companies (D.B. Power), FMCG brands (Kohinoor, owned by McCormick Switzerland GMBH) and media outlet (hostile takeover of NDTV Limited). 

In the start-up space, Mensa Brands acquired and invested in various brands. J.B. Chemicals made the largest number of acquisitions of pharmaceutical brands in the year, in addition to Shell and Sembcorp undertaking acquisitions in the renewable energy sector. The year also saw Mitsui’s foray into the renewable energy space with its joint venture with ReNew Power, India’s first round-the-clock renewable energy project. 

Public or private

In the Indian M&A market, while both private and public transactions are prevalent, private deals are more popular. This is especially true considering the increasing share of private equity in this sector. This is also evident from the rising trend of conglomerates andprivate equity-backed platforms becoming active in the private M&A space. Indian start-up businesses continued to focus on consolidation and pursuing an IPO which resulted in a lower number of large private M&A deals in the start-up space. Public M&A was relatively busy, with acquisitions across sectors such as media, cement, financial services, pharmaceutical, and retail, with domestic business houses being the most active.

Deal highlights

The acquisition of the Indian payments gateway, Billdesk, by the Dutch investment firm PayU, was called off a month after it was green-lit by the Competition Commission of India (CCI). PayU had informed the Indian stock exchanges that the deal was terminated automatically as certain conditions precedent to the transaction were not fulfilled by the designated long-stop date.

Two unicorns, Zomato and BharatPe, made headlines due to their corporate governance issues. Zomato’s acquisition of Blinkit was controversial as one of the co-founders of Zomato was married to the co-founder of Blinkit. Zomato’s CEO justified the deal on the grounds that there was no conflict of interest and no concerns about related party transactions arose. BharatPe, one of India’s largest and most prominent payment services providers, filed a civil suit against its former managing director, Ashneer Grover, to prevent him from making derogatory remarks about the company. The company also filed a criminal complaint against Grover and his wife over allegations of fraud and misappropriation of funds by the two. The two cases are currently pending before the Delhi High Court.

Deal trends

As part of the government's continued emphasis on easing the process of doing business, there have been several regulatory and administrative changes of note. These include a push towards digitisation in addition to foreign exchange regulations for inbound and outbound investments continuing to be relaxed. Meanwhile, the judicial system has adopted virtual court technology, thereby increasing accessibility and reducing cost and litigation time.

There have been various relaxations and changes in key sectors which are bound to attract foreign investments, which are discussed in detail later. The telecom regulations have been amended to promote ease of doing business - with the launch of 5G services across India, current players will require additional investments at an accelerated pace, especially for infrastructure development. Similarly, in the renewable sector, India is still well short of the government’s target of 500 GW of fossil-fuel-free power by 2030 and several prominent players are investing heavily in this sector. The government has an increased emphasis on infrastructure projects including road infrastructure which has attracted investments from a number of leading investor groups. It is anticipated that this will be a key sector for M&A going forward.

Warranty and indemnity (W&I) insurance has gained popularity to protect against the breach of representations and warranties in deal documentation and to mitigate deal exposure. It is particularly seen in deals involving uncertain market conditions. Cybersecurity insurance is also being considered in dealmaking after reports of several data breaches and cyber-security attacks in the past years.

Due to the global economic slowdown, several deals are adopting a deferred consideration structure in the form of an earn-out mechanism. Call and put options are being used to bridge the valuation gaps which are triggered when the investee company achieves certain milestones. Investments from neighboring countries continue to be restricted, leading in many instances to such entities exploring alternate deal structures. Another recent trend is an increased push for the implementation of family trust structures in family-owned business looking to attract financial investors.

The government completely overhauled the Indian overseas investment framework (OI regulations) and therefore many routes popularly adopted by Indian founders to establish holding companies overseas have been ruled out.

Private equity

India continues to be one of the world's largest start-up and early-stage company ecosystems. Three PE-backed start-ups, Delhivery, Tracxn, and DroneAcharya, successfully completed their IPOs, while certain start-ups have filed their draft red herring prospectuses for listing. PE-backed real estate investment trusts and infrastructure investment trusts have also been instrumental in creating new opportunities for investors exploring India. In other words, institutional investors have been a key driving force for M&A deal-making in India, and many Indian sponsors have been driven to become increasingly active to remain competitive.


The OI regulations have revamped the law for outbound investments from India. These regulations contain a mix of liberalisations (for instance, allowing Indian entities to own overseas businesses with operations in India) and restrictions (limiting Indian founders from setting up overseas holding companies or creating bespoke employee stock ownership plans). The OI regulations also impose additional reporting obligations.

With effect from 2022, the top 1,000 listed entities are mandated to report material risks and opportunities concerning ESG as part of the Business Responsibility and Sustainability Reporting. Many deals have started to include ESG-specific representations in the documentation pursuant to ESG-focused diligence.

Parliament introduced a bill to amend the Competition Act, 2002, requiring all transactions with a deal value exceeding 20 billion Indian rupees to be reported to the CCI and reducing the timeline for the CCI to pass an order to 150 days from 210 days. Additionally, the Energy Conservation Act, 2001 was amended in 2022, providing power to the concerned government authority to set up a carbon credit trading scheme, thereby opening up dealmaking in the renewable energy sector. The Data Protection Bill was published for public comments; once passed, considerations around data protection would become a significant aspect of dealmaking.

The Online Gaming (Regulation) Bill was introduced to regulate all online games played on any electronic device through non-assignable and non-transferable licenses. The government is also planning to revamp the current financial regulations to overhaul the governance of the banking sector, improve investor protection, and establish a central repository for financial and ancillary information.

Going public

An acquirer can choose two ways to secure control in a publicly listed company in India - triggering a voluntary or mandatory tender offer. Under the Substantial Acquisition of Shares and Takeovers Regulations, 2011, barring certain exemptions, acquiring 25% or more voting rights or control of a publicly listed company requires the buyer to tender a public offer to further acquire at least an additional 26% of the target shares. Acquirers should also ensure that minimum public float (prescribed at 25%) is maintained unless the target is delisted pursuant to the transaction which has its own challenges.

Further, public takeovers may require mandatory regulatory approvals, including from sector-specific regulators and anti-trust approvals. These regulatory approvals may be conditional or may prescribe additional compliance.

Given the market uncertainty and deals falling through pre-closing, usage of break fees and reverse break fees have increased in the India M&A market. However, the regulatory position around the enforcement of break fees including under foreign exchange control laws is still unclear.

Private matters

As stated, due to the economic slowdown and valuation concerns, the deferred consideration mechanism has become more prevalent in the Indian market.

Earnouts and revenue milestone-driven payouts in promoter-driven companies are gaining relevance as they incentivise key resources to remain part of the company. However, such arrangements face additional time and quantum restrictions imposed by the regulators in case of cross-border deals. Further, W&I insurance and cybersecurity insurance have gained traction.

There is no practice for private takeover offers in India, as private companies impose restrictions on the transfer of shares, and each instance of the transfer must be approved by the board of directors.

Typically, M&A transactions in India are governed by Indian law. However, in the event of a cross-border M&A transaction, the dispute resolution provisions in the deal documents generally provide for foreign-seated arbitration. Moreover, given the increased usage of W&I insurance, an increasing number of deal documents are giving preference to English law from a premium mitigation perspective.

Looking ahead

Despite the slowdown in the market and mixed results in the primary market, there were a fair amount of marquee exits. Two of the largest exits in 2022 were the sale of Actis’ stake in Solenergi Power Private Limited to Shell Overseas Investments B.V and KKR’s full exit from Max Health. Some other notable exits involved:

  • Sequoia Capital reducing its shareholding in Zomato and Uber Technologies complete disinvestment in Zomato;

  • TPG selling its investment in Campus Activewear; and

  • Carlyle, China Momentum Fund, and Softbank selling their stake during Delhivery’s IPO.

With the opening up of several sectors and investor-friendly reforms brought in, an increase in the quantum of investments is anticipated. Investments in key sectors such as pharmaceutical, technology, telecommunication, and infrastructure (including roadways and ports) are expected to continue to attract both domestic and foreign investors and dominate the M&A market. ESG investments and conducive government policies may also result in increased investment.

Further, given the growing shift towards sustainable power, there is likely to be a boost in investments in the electric vehicles, batteries, and green energy sectors.

The funding winter may have started taking shape and start-ups might see more activity in the form of consolidations to overcome the cash deficiency. Conglomerates will continue their expansion into newer sectors. Despite the lower deal volumes in the PE-backed deal space in the past 12 months, an upward trajectory could be expected by the second half of 2023.

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