Mergers and acquisitions in India will likely see a surge in volumes in 2025-26 both because of a volatile equity market and strong corporate balance sheets, said investment bankers and dealmakers at the Mint India Investment Summit.
M&A activity in 2024 fell to a four-year low in terms of deal value to $80.5 billion, down 11.4% from the year before, show data from LSEG Deals Intelligence. Last year, however, was India’s busiest dealmaking year with 2,756 deals announced.
“If you are talking about M&A, in the last two years M&A volumes were down. That was offset by robust equity market volumes,” said Arun Saigal, managing director and head of financing and M&A, Barclays India. “If you were to ask me going forward for the next 12-18 months, we would expect M&A volumes to be up because equity markets are clearly a little more volatile.”
The drivers for domestic M&A activity are many, added Chandresh Ruparel, MD and head of India, Rothschild & Co, with “India being still a bright spot relative to where the world stands today. The market is huge. There is a lot to be achieved”.
Corporate balance sheets of Indian companies “are the strongest ever”, he added.
“I think there is a lot of cash sitting on Indian balance sheets today. Second, the size of the opportunity is huge. You look at the Birlas, Adanis and Tata’s, everybody’s out putting greenfield plants now and diversifying. So the opportunity set and the returns that India has to offer are significant,” said Ruparel.
Saigal expects more inbound M&A activity in the coming years. “It (inbound activity) is down to about $50 billion a year, which is lower from the peak of $70 billion. One thing is clear: There is a lot of dry powder, and outside of US there is a lot of interest towards India globally,” said Saigal.
The top sectors
Among sectors, infrastructure, energy, cement, healthcare and pharmaceuticals, and media and telecom are likely to witness the maximum number of deals and consolidation over the next few years, said experts at Mint’s annual summit, which was held on Friday and Saturday.
“Traditionally, we have gone through greenfield, brownfield M&As. We are seeing a lot more activity on the M&A side,” said Amit Kothari, chief executive, JK Cement, UAE. “We have done about 3-4 acquisitions over the last two years. We entered the paints industry through our white cement business, which is a natural next step. And the reason for going for an acquisition was not just adding capacity, it was also in the interest of adding know-how and innovation.”
Saigal added that from a domestic standpoint, a large part of M&A activity would be due to consolidation in the sectors mentioned above.
“Corporate balance sheets are incredibly clean. I think scale is also helpful in lowering cost of capital, navigating the ecosystem. So some of those drivers will continue,” said Saigal.
Sidharrth Shankar, partner, JSA Advocates and Solicitors, said the information technology and IT-enabled services (IT and ITes) sector was undergoing a consolidation.
“We are looking at whether there could be Indian conglomerates looking at… an overseas acquisition that is a billion-dollar deal. You can look at HCL’s large deal, which they’ve recently concluded in 2024. We’ve looked at Wipro buying out, we looked at L&T. So if you look at FY24 itself, we saw a fair bit of acquisition kind of mode,” said Shankar.
Saigal added that as Indian companies grow in size, scale and capabilities, domestic and inbound deals would continue to dominate M&A activities in India.
“Outside of the US, India is probably the second place most investors want to put money to work. So as these valuations correct, you would definitely see inbound activity increase, chiefly from the financial investor community,” said Saigal.
The renewables opportunity
Experts at Mint’s investment summit said India’s renewable energy industry was also likely to attract a significant number of deals as companies raced to capitalize on the country’s aspiration to become a net zero emissions nation by 2050.
Rothschild’s Ruparel said the potential of the renewables sector has barely been tapped. “We have not even scratched the surface as far as renewables is concerned,” he asserted, pointing to the certainty of returns being attractive to investors and the sheer requirement of powering the Indian industry on sustainable energy.
“Renewables and broader infrastructure have probably been one of the busiest sectors consistently for the last few years,” added Saigal.
All that said, Shankar of JSA emphasized the critical role of corporate governance standards in attracting both domestic and foreign investments as far as M&A deals are concerned.
Source: Mint