Table 1: Dealmaking activity – comparing 2024 with 2023^[2]

Nature of transaction	Number of deals (volume)		Value (US$ billion)
	2023	2024	2023	2024
Mergers and acquisitions	494	683	25.20	44.1
Private equity and venture capital	1,045	1,298	27.40	30.9
Initial public offers	57	86	6.249	21
Qualified institutional placements	45	119	7.046	2

 

Dealmaking activity: mergers and acquisitions

A total of 683 M&A deals valued at approximately US$44.1 billion were reported in 2024, reflecting a 37 per cent increase in deal volumes and a significant 75 per cent increase in values compared to 2023. Domestic M&A activity emerged as a key driver, with 479 deals worth US$23.5 billion, demonstrating the trend in Indian companies either consolidating or expanding their businesses whereas outbound M&A recorded the highest number of deals since 2012.^[3] Deal values were significantly higher than the previous year due to two high value deals worth US$12.5 billion (Aster DM Healthcare/Quality Care India and Viacom 18/Disney Star). In contrast inbound deal values declined by more than half even though deal volumes were steady.

 

The majority of the deal making activity involving India, targeted the industrials sector which totalled US$10.9 billion, marking a decrease of 22.8 per cent compared to 2023 and accounted for 13.5 per cent market share. Healthcare totalled US$9.8 billion, increasing by 51.5 per cent from 2023, and capturing 12.2 per cent market share. Financials rounded out the top three sectors with 11.7 per cent market share, as the deal value totalled US$9.44 billion, down 69 per cent from a year ago.^[4]

Dealmaking activity: private equity

India’s PE market showed resilience despite tough market conditions in 2024, with 1,298 deals valued at US$30.9 billion, representing a 24 per cent increase in volume and a 13 per cent increase in values compared to the previous year. Although the average deal value declined from US$26.2 million in 2023 to US$23.8 million in 2024, the overall deal activity suggests optimism for future growth. Notably, 2024 witnessed only two billion-dollar deals, but 71 high-value deals (less than or equal to US$100 million) together valued at US$20.1 billion.^[5]

 

This growth is expected to continue into 2025, with expectations of more companies entering the unicorn club and heightened late-stage funding activity. The top PE deals of the year included two billion-dollar deals: Data’s acquisition of ATC India Tower Corporation and Highways Infrastructure Trust’s acquisition of 12 highway assets from PNC Infratech, together valued at US$ 3.59 billion and contributing 12 per cent to the overall PE values.

 

Banking and financial services witnessed 17 per cent of PE activity by volume placing it on the leader board, closely followed by the retail sector at 15 per cent. However, the retail sector dominated PE activity by deal volume contributing 20 per cent of the total with pharma and healthcare emerging as the close second.

 

Operation of the market

 

Equity incentive arrangements

Equity incentive arrangements are critical components in aligning the interests of management, employees and investors, particularly for PE sponsors seeking to optimise value creation. They are designed to retain key talent, drive performance and ensure a long-term commitment to the company’s success. In India, a variety of equity incentive mechanisms are employed, each with distinct advantages depending on the company’s objectives and the stage of growth.

 

Employee stock option plan

The employee stock option plan (ESOP) is a cornerstone of equity incentives in India. Companies typically establish a trust to manage the options granted to employees, which allow employees to purchase shares at a future date, often contingent on meeting vesting requirements. Vesting is generally structured in tranches, aligning with the anticipated timeline of a PE investment, ensuring long-term retention and performance-driven outcomes. Notably, the ability to exercise these options is restricted until after a specific vesting period, and the shares are non-transferable and cannot be pledged or encumbered. ESOP liquidity in the current market system is booming; in 2024 a total of 23 start-ups undertook buy-back schemes which helped generate wealth of approximately US$167 million.^[6]

 

Employee stock purchase plan

The employee stock purchase plan (ESPP) provides an alternative to the traditional ESOP structure where shares are allotted to employees at either a discount or par value, without any vesting schedule. This immediate ownership structure fosters a sense of ownership and alignment with the company’s performance. Additionally, Indian law allows for the issuance of sweat equity shares to employees or management in exchange for their contributions such as intellectual property, know-how or other valuable assets. This flexibility enhances the company’s ability to incentivise key talent without requiring immediate cash expenditure.

 

Stock appreciation rights plans

Stock appreciation rights (SARs) offer a compelling incentive structure by enabling employees to benefit from the increase in value of the company’s stock. Under SARs, employees are entitled to receive a payment based on the appreciation of a specific number of shares, which can be settled either in cash or in company shares. When settled in shares, these are referred to as equity-settled SARs. A variation of SARs, known as phantom or shadow stock options, provides a cash-based incentive linked to the company’s share price appreciation. These performance-based incentive plans are directly tied to the company’s valuation, aligning employee and investor interests by ensuring that the rewards are tied to tangible growth in shareholder value.

 

Other management equity incentives

Beyond the traditional equity-based plans, other management incentive structures are increasingly utilised to incentivise performance and retain key talent. These include management upside agreements, earn-out structures and incentive fee arrangements. Earn-out agreements are commonly negotiated between investors and founders or key employees, with the understanding that a portion of the exit proceeds will be shared with them if specific financial or valuation targets are met. These arrangements are often used to retain management during the exit process and to ensure that key individuals are aligned with the company’s strategic goals. While earn-out agreements can provide significant upside for management, they also raise potential concerns regarding conflicts of interest, particularly in relation to governance and minority shareholder interests. Despite these challenges, the use of such incentive structures continues to grow, with stakeholders finding ways to balance incentives with governance considerations.

 

Standard sales process

Dealmaking in India traditionally has remained relationship-driven, involving identifying the target with high-quality assets from a shallow pool of assets in the market, winning deals, establishing synergy with the founders, promoter groups or management, agreeing on indicative valuation and entering into a term sheet.

 

In the past few years, there has been a paradigm shift towards a controlled competitive bid model run by investment bankers or similar intermediaries. A seller-led trade sale process by way of a controlled auction has the following advantages:

1. creating competition among multiple bidders, thereby encouraging higher prices and more favourable terms for the seller (including diluted warranty and indemnity packages);
2. satisfaction of corporate governance concerns by maintaining transparency of process and superior control over the flow of information and securing the highest reasonably attainable price for stockholders;
3. the ability to shorten the timelines by creating deadlines for submission of bids and completing various phases of the sale process; and
4. a greater degree of confidentiality.

 

In addition, controlled bid processes have the potential to unlock value and have fetched astronomically high valuations for highly desirable assets that were put on the block, thus making an auction sale an attractive option for the selling stakeholders.

 

In recent years, emerging trends in sale processes in India have included:

1. institutional sellers not providing any business warranties except in buyouts or control deals;
2. parties using escrow mechanisms and deferred consideration for post-closing valuation adjustments and indemnities;
3. target management facilitating trade sales and providing business warranties under contractual obligations under shareholders’ agreements or on account of receiving management upside sharing incentives;
4. use of locked-box mechanisms; and
5. buyers arranging warranty and indemnity insurance to top up the diluted warranty and indemnity package obtained in competitive bid situations to ensure that meaningful protection is obtained.

Year in review

 

Recent deal activity

Regulatory scrutiny significantly shaped M&A activity in 2024, causing strategic changes with an increased focus on early antitrust evaluations to gauge approval likelihood or asset divestiture needs. This created a ‘barbell effect’, where companies pursued either small, low-profile deals or large, high-potential transactions. Smaller deals dominated, comprising 95 per cent of all activity. The heavy regulatory scrutiny rendered uncertainty in deal timelines and adding cost and risk to contested deals.^[7]

 

In terms of sectoral activity, there has been a well-distributed diversification across major sectors, such as manufacturing, IT and retail in terms of deal volume and in the pharmaceutical, manufacturing and media sectors has significantly increased from the previous year in terms of deal volume.^[8]

Table 2: Top 5 M&A deals in 2024^[9]

Target	Acquirer	Sector	Deal value (US$ billion)	Percentage stake	Cross-border/domestic
Star India Pvt Limited – Disney Star	Viacom18 Media Private Limited	Media and entertainment	8.5	N/A	Outbound
Quality Care India Limited	Aster DM Healthcare Limited	Pharma, healthcare and biotech	5.008	N/A	Domestic
British Telecom Group Plc	Bharti Enterprises Limited	Telecommunications	4	25%	Outbound
Bharat Serums and Vaccines Limited	Mankind Pharma Limited	Pharma, healthcare and biotech	1.642	100%	Domestic
Hindustan Coca-Cola Private Limited	Jubiliant Beverages Private Limited	Retail and consumer	1.488	40%	Domestic

 

The start-up ecosystem in India, which is ranked third globally, bounced back with US$14.4 billion in funding and 13 initial public offerings (IPOs). The funding winter in terms of PE deals has continued into 2024. The PE landscape in 2024 showcased resilience, with 1,298 deals raising US$31 billion, up from 1,046 deals valuing US$27.4 billion in 2023. The predictions for the PE market in terms of interest rates (the US Federal Reserve’s moves to manage interest rate changes and inflation, and their corollary impact on global liquidity and financing conditions) and growth rates combined with the political climate threw up a mixed mandate. However, Indian interest rates have held their own against the global failure.

 

Growth rates in India have been high relative to the rest of the world. However, Indian capital markets were spurred onwards by tailwinds from Indian investors, even though global investors exited. We saw several IPOs, especially in PE-backed entities, as focus moved away from M&A or PE investment to exit through listings. All of this resulted in PE investors focusing on exits rather than investments. Despite these challenges, PE investment activity grew by 5 per cent year-on-year after two years of decline, reflecting the strength of the country’s economic expansion, supported by robust fiscal health, rising GST collections, and a favourable macroeconomic environment.^[10]

Table 3: Top 5 PE deals in 2024^[11]

Investor	Investee	Sector	Deal value (US$ billion)	Percentage stake
Data Investment Trust	ATC India Tower Corporation Private Limited	Telecommunications	2.5	100%
Highways Infrastructure Trust	PNC Infratech limited – 12 highway assets	Infrastructure management	1.09	100%
KKR Asian fund IV	Healthium MedTech Private Limited	Pharma, healthcare and biotech	0.843	100%
Brookfield India Real Estate Trust	Bharti Enterprises Ltd – four grade A assets	Real estate	0.723	50%
GQG partners	Bharti Airtel Ltd	Telecommunications	0.71	1%

Financing

Acquisition financing in India is continually evolving to comply with the stringent regulatory framework set by the Reserve Bank of India (RBI).^[12] Indian banks are prohibited from financing a promoter’s equity contribution and from providing funds for acquiring equity shares, except under exceptional circumstances such as in instances where the existing foreign promoters (and/or domestic joint promoters) voluntarily propose to disinvest their majority shares in compliance with applicable Securities and Exchange Board of India (SEBI) guidelines. Consequently, private companies secure financing for domestic acquisitions by way of a charge over the target’s assets or shares through:

1. foreign portfolio investors (FPIs);
2. non-banking financial companies (NBFCs);
3. subscription to securities by Indian entities;
4. registered onshore alternative investment funds; and
5. international banks, institutional lenders, funds and other entities.^[13]

 

Under the extant foreign exchange regulations, Indian parties cannot pledge their shares in favour of overseas lenders if such borrowing is for any direct or indirect investment in India. Due to this, foreign acquirers establish a special purpose vehicle outside India to obtain financing.^[14] Indian foreign owned or controlled companies are prohibited from raising any domestic debt for further downstream investments.^[15]

 

In addition, Indian entities are not permitted to raise external commercial borrowings (ECBs) for the purposes of acquisition of shares, and the Companies Act 2013 restricts public companies (including deemed public companies) from providing direct or indirect security or financial assistance for the acquisition of their own securities. Given these regulatory constraints, mezzanine financing is frequently employed as an alternative. It is commonly structured through instruments such as compulsorily convertible preference shares, optionally or partially convertible preference shares and convertible debentures.^[16] However, if the mezzanine finance is provided by an offshore entity, optionally or partially convertible preference shares or optionally convertible debentures are treated as ECBs and will need to comply with the applicable guidelines.^[17]

 

Indian masala bonds, rupee-denominated bonds issued to overseas lenders, have emerged as an alternative for debt financing; however, their use in domestic acquisitions remains limited due to ongoing regulatory uncertainty regarding the permissibility of utilising proceeds for capital market and equity investments.^[18]  Although banks in India are prohibited from issuing payment-in-kind loans, they can be obtained through NBFCs or structured through non-convertible debentures.^[19] The RBI is easing restrictions on NBFCs after improvements in their compliance.^[20] This move is expected to increase the role of NBFCs in acquisition financing, providing more flexibility and alternative funding options in the market.

 

The RBI has introduced a framework for reclassifying FPIs exceeding the 10 per cent ownership threshold in Indian companies into foreign direct investments (FDIs), with specific reporting obligations, approvals and custodian involvement.^[21] Within five trading days from the settlement date resulting in breach of the prescribed limit of FPI investment (i.e., 10 per cent of total paid-up equity capital of the Indian company),^[22] investors can either divest their holdings or reclassify them as FDI, subject to prescribed conditions including specific reporting obligations, approvals and custodian involvement.^[23] This aims to ensure compliance with the Foreign Exchange Management (Non-debt Instruments) Rules 2019, streamlining the transition from portfolio investments to FDI.

 

The SEBI has expanded India’s sustainable finance framework by launching green securitisation, enabling issuers to raise funds through green, social and sustainability-linked bonds in sectors such as renewable energy.^[24] This follows the 2023 introduction of blue and yellow bonds for water conservation and solar energy. ESG considerations are gaining importance in acquisition financing, especially as global investors push for investing that is sustainable and responsible. This has influenced the market, with lenders offering preferential terms if the acquired company meets specified ESG standards.

Key terms of recent control transactions

Steered by the need for value creation, preservation and enhancement, control will remain a key element for most investors in future, as it has become a deal driver in most transactions.

 

Pursuant to the acquisition of a controlling stake, the PE investor will either hire a fresh management team or choose to retain the existing management team. As an emerging trend, PE firms are choosing to engage dedicated operating teams, hire industry leaders with sectoral expertise or engage external consultants. Typically, control deals in India include terms around deferment of consideration and post-closing adjustments, to provide suitable comfort to the acquirer for any post-valuation or completion expenditure or liabilities. In addition, essential pre-completion requirements for giving effect to control transactions include obtaining third-party lender consents, consents for change of control (if applicable) under key agreements, and consents from sectoral regulators, which are essential for ensuring post-acquisition business continuity.

Exits

In 2024, the buoyant capital markets created a challenging environment for PE investors due to the burgeoning bid-ask spread between investors and sellers. However, the same capital markets provided a tailwind for PE exits, which recorded the second-highest number of deals (282 exits worth US$26.7 billion against the 304 exits worth US$24.9 billion in 2023), reflecting a 7 per cent year-on-year growth in value terms. Exits via the open market dominated this year’s exit activity with an all-time high of US$12.9 billion, accounting for 48 per cent of overall exits during the year with an increase of a whopping 156 per cent from 2023. PE-backed IPOs experienced the highest growth, rising by 130 per cent in value terms.^[25]

 

PE exit activity was predominantly concentrated in the financial services, technology, e-commerce, pharmaceuticals, and retail and consumer products, each recording exits exceeding US$1 billion. The financial services sector saw exits worth US$5.9 billion across 68 deals; a 20 per cent decline compared to 2023 (US$7.4 billion across 80 deals). This was followed by exits in the technology sector totalling US$4 billion across 27 deals, a 53 per cent growth compared to 2023 (US$2.6 billion across 23 deals). E-commerce recorded exits worth US$2.7 billion across 30 deals, a 4 per cent decline compared to 2023 (US$2.9 billion across 35 deals).^[26]

Table 4: Largest PE exits in 2024^[27]

Company	Seller	Buyer	Value (US$ billions)	Stake	Sector	Exit type
Bharat Serums and Vaccines	Advent	Mankind Pharma	1.628	100%	Pharmaceuticals	Strategic
Manjushree Technopack	Advent	PAG	1	>50%	Industrial products	Secondary
VFS Global Services	Blackstone	Temasek	0.95	18%	Technology	Secondary
Brookfield’s 2.2 GW Assets	Brookfield	Gentari	0.9	100%	Infrastructure	Strategic
eBBS Healthcare Solutions	Chrys Capital	EQT	0.86	N/A	Technology	Secondary

Legal framework

Acquisition of control and minority interests

Key deal structures

Acquisition in India can be structured by way of merger or demerger, as an asset or business transfer, as a share acquisition or joint venture. Commercial and tax advantages are key considerations for investors when determining the structure for the transaction.

Legal framework

The principal legislation governing share purchases, slump sales, asset and business transfers, joint ventures, and liquidation and insolvency is the Companies Act, the Indian Contract Act 1872, the Specific Relief Act 1963, the Income Tax Act 1961, the Competition Act 2002 and the Insolvency and Bankruptcy Code 2016.

 

Competition in India is regulated by the Competition Commission of India (CCI), which is required to grant prior approval for all private equity transactions that exceed the thresholds specified under the Competition Act 2002. In its assessment of acquisitions, the CCI primarily evaluates whether the transaction is likely to result in a dominant market position or adversely affect competition within the relevant market. In addition, transactions involving listed entities or public money are also governed by various regulations promulgated by the securities market regulator, SEBI. The functioning of banks and NBFCs is specifically regulated by the Banking Regulation Act 1949, under the supervision of the RBI. In the context of cross-border investments involving non-resident entities, the provisions of the Foreign Exchange Management Act 1999 (FEMA), along with its associated rules and regulations, are applicable.

 

Furthermore, there is sector-specific and subject- matter-specific legislation, including legislation that is applicable to environmental, intellectual property, employment and labour matters, that may be applicable to a transaction. A key piece of legislation in finalising deal dynamics is the Indian Stamp Act 1899, which provides for stamp duty on various instruments, including transfer of shares, conveyances and definitive documents.

Structuring and entry routes for offshore investors

Foreign investment is permitted in a company and limited liability partnership subject to compliance with sectoral caps and conditions. However, foreign investment is not permitted in a trust, unless the trust is registered with SEBI as a VC fund, alternative investment fund, real estate investment trust (REIT) or infrastructure investment trust (InvIT). Foreign PE investors can invest in India through the entry routes listed below.

Foreign direct investment

Investors typically route their investments in an Indian portfolio company through an FDI vehicle if the strategy is to play an active part in the business of the company. FDI is made by way of subscription or purchase of securities, subject to compliance with the pricing guidelines, sectoral caps and certain industry-specific conditions. FDIs are governed by the rules and regulations set out under the FDI policy and the Foreign Exchange Management (Non-Debt Instruments) Rules 2019 (the NDI Rules).

Foreign portfolio investment

FP Is in India are governed by the SEBI (Foreign Portfolio Investors) Regulations 2019.

 

FPIs are permitted to invest in shares, compulsorily convertible debentures, warrants and other permissible instruments listed, or to be listed on a recognised stock exchange in India (through both primary and secondary routes), subject to the aggregate holding by the FPI of the total paid-up equity capital (on a fully diluted basis) or the paid-up value of each series of debentures, preference shares or warrants issued by the investee company not exceeding 10 per cent. If this threshold is breached, the investment is reclassified as FDI, in the manner specified by SEBI and the RBI. Foreign investors who have a short investment horizon and are not keen on engaging in the day-to-day operations of the target or want to invest through debt securities without the investment being classified as an ECB, may opt for this route after prior registration with a designated depository participant as an FPI. The process of registration is fairly simple and ordinarily it does not take more than 30 days to obtain the certificate.

Foreign venture capital investment

The foreign venture capital investor (FVCI) route was introduced with the objective of allowing foreign investors to make investments in VC undertakings. Investment by such entities into listed Indian companies is also permitted subject to certain limits or conditions. Investment through this route requires prior registration with SEBI under the SEBI (Foreign Venture Capital Investors) Regulations 2000. Investment companies, trusts and partnerships, mutual funds, charitable institutions, asset management companies, investment managers and other entities incorporated outside India are all eligible for registration as FVCIs. One of the primary benefits of investing through this route is that FVCI investments are not subject to the RBI’s pricing regulations or the lock-in period (after listing of shares). The NDI Rules also allow FVCIs to purchase equity, equity-linked instruments or debt instruments issued by Indian start-ups, irrespective of the sector, subject to compliance with the sector-specific conditions (as applicable).

 

Tax structuring for offshore investors

Double taxation avoidance treaty

The tax treatment accorded to non-residents under the Income Tax Act 1961 is subject to relief as available under the relevant tax treaty between India and the investor’s country of residence. If the non-resident is based in a jurisdiction that has entered into a double taxation agreement (DTA) with India, the double taxation implications are nullified and the Indian income tax laws apply only to the extent that they are more beneficial than the terms of the DTA, subject to certain conditions. PE investors structure investment through an offshore parent company with one or more Indian operating assets. Understandably, the primary driver that determines the choice of jurisdiction for an offshore investing vehicle is one of approximately 90 jurisdictions that have executed a DTA with India.

General Anti-Avoidance Rule

To curb tax avoidance, the Indian government introduced the General Anti-Avoidance Rule (GAAR) with effect from 1 April 2017, with provision for any income from the transfer of investments made before 1 April 2017 to be grandfathered. It is now imperative to demonstrate that there is a commercial reason, other than to obtain a tax advantage, for structuring investments out of tax havens. Once a transaction falls foul of the GAAR, the Indian tax authorities have been given wide powers to disregard entities in a structure, reallocate income and expenditure between parties to the arrangement, alter the tax residence of the entities and the legal situs of assets involved, treat debt as equity, and vice versa, and deny DTA benefits.

Place of effective management risk

Under the Income Tax Act 1961, tax residence forms the basis of determination of tax liability in India, and a foreign company is to be treated as tax resident if its place of effective management (POEM) is in India. Pursuant to the POEM Guidelines, POEM is ‘a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are in substance made’. If a foreign company is regarded to have a POEM in India, its global income is taxable in India at the rates applicable to a foreign company in India (at an approximate effective rate of between 41.2 and 43.26 per cent). Accordingly, PE investors must exercise caution when setting up their fund management structures, and in some cases their investments, in Indian companies.

 

Fiduciary duties and liabilities

Under Section 166 of the Companies Act and various court rulings in India, directors, including those nominated by shareholders, have clear obligations. They must act in good faith for the benefit of the company and its stakeholders, exercise due care and diligence, avoid conflicts of interest, and refrain from seeking undue gains for themselves or their associates. To mitigate the risk of liability for nominee directors in day-to-day operations, PE investors should appoint their nominees as non-executive directors and designate a separate officer to oversee statutory and operational compliance. Additionally, shareholder agreements should mandate the company to secure adequate directors’ and officers’ liability insurance for nominees.

 

While PE investors, as shareholders, do not face additional fiduciary duties or restrictions on exit or consideration (particularly if domiciled in different jurisdictions), their inter se rights are governed by the shareholders’ agreement. In control deals, however, a majority investor may be deemed a promoter for certain regulatory purposes, thus assuming heightened duties towards the company’s shareholders.

 

In the context of REITs and InvITs in India, which are governed by SEBI regulations, the ‘sponsor’ is responsible for establishing the REIT or InvIT, with the sponsor group comprising entities controlled by the sponsor. SEBI has introduced lock-in periods for sponsors and sponsor groups to protect investor interests. Additionally, SEBI’s stewardship code mandates that sponsors and unitholders holding at least 10 per cent of the units act in the best interests of the REIT or InvIT, manage conflicts of interest and establish clear policies for voting and stewardship responsibilities.

 

Regulation

 

Relevant regulatory bodies

In the context of PE investments, the relevant regulatory bodies in India are the RBI, SEBI, the CCI, the Department for Promotion of Industry and Internal trade and other sectoral regulators, depending on the sector in which the PE investor makes an investment, such as the Insurance Regulatory Development Authority of India, the Telecom Regulatory Authority of India and the Directorate General of Civil Aviation.

 

The government is nurturing an environment conducive to M&A by improving regulations, simplifying the cross-border merger process and enhancing transparency.

 

Effects of conducive legislation for start-ups

The concept of ‘reverse flipping’ or ‘internalisation’ has witnessed increasing adoption among Indian start-ups including Razorpay, PineLabs, Meesho, Urban Ladder, Livspace and Zepto.^[28] Start-ups that were incorporated overseas to leverage favourable tax regimes and regulatory frameworks, are now relocating back to India due to relaxed regulatory requirements, enhanced government incentives and a robust IPO market offering favourable valuations and attractive exit opportunities for investors.^[29]

 

Recent amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 eliminated the need for National Company Law Tribunal approval for merging foreign companies with Indian companies permitting such transactions under the fast-track merger scheme outlined in Section 233 of the Companies Act 2013.^[30] This is likely to push a wave of reverse flips to India as businesses look at Indian IPOs in the next two years.^[31]

 

Key regulatory developments

Liberalisation of foreign direct investment policy

In August 2024, the government liberalised the NDI Rules to streamline foreign investments and facilitate cross-border transactions. The amendments simplify share swaps, allowing the Indian companies to issue or transfer equity instruments in exchange for foreign company equity instruments, enabling global expansion through M&A and strategic partnerships.^[32] This makes the cross-border M&A transaction more efficient by reducing regulatory bottlenecks and increasing deal flexibility.

 

Another significant reform in 2024 was the liberalisation of FDI norms in the space sector, which previously required government approval for all investments. The policy was revised to introduce three sub-categories:

1. satellites and data products – up to 74 per cent FDI via the automatic route, with approval beyond this limit;
2. launch vehicles and spaceports, up to 49 per cent FDI permitted automatically, with approval needed thereafter; and
3. manufacturing of satellite components and user segments – up to 100 per cent FDI allowed under the automatic route.^[33]

 

This aligns with the 2023 Indian Space Policy, boosting private-sector participation, job creation and global integration. The sector, valued at US$8.4 billion in 2023, has seen growing private investment, such as launch of Tata Advanced Systems’ Earth observation satellite.^[34]

 

Furthermore, in November 2024, the Ministry of Finance proposed raising the FDI cap in insurance from 74 per cent to 100 per cent under the automatic route, allowing insurers to operate in across business categories and reducing the foreign re-insurer’s net asset requirement from 50 billion rupees to 10 billion rupees.^[35] This move was welcomed and was approved in the Union Budget 2025–26. These measures aim to attract more foreign investment, enhance capital availability and encourage new entrants in the sector.

Amendments to India’s merger control and digital competition framework

In September 2024, India’s merger control regime underwent significant amendments, including the introduction of the deal value threshold (DVT), the Competition Commission of India (Combination) Regulations 2024 and revised exemption criteria under the Competition (Criteria for Exemption of Combinations) Rules 2024. The DVT mandates CCI approval for transactions exceeding 20 billion rupees if the target has significant operations in India, tightening oversight on digital and pharma M&A.

 

These changes will impact dealmaking by increasing antitrust scrutiny, particularly for minority stakes and digital sector investments. PE firms may face longer approval timelines and heightened compliance burdens, especially in sectors such as tech, which earlier bypassed the scrutiny under de minimis exemption.

 

In addition, the draft Digital Competition Bill 2024 introduced by Ministry of Corporate Affairs proposes an ex ante regulatory framework for digital markets. While the impact on CCI approval timelines remains uncertain, these reforms aim to create a more competitive market and attract long-term foreign investment.

 

Outlook and conclusions

The Indian M&A landscape, driven in one of the fastest-growing economies continues to present a wealth of opportunities for both domestic and international M&A transactions. Trade sanctions and tariffs introduced by the United States will have significant ripple effects in the G20 economies with effects trickling down to deal values and volumes.

 

Central banks have been working to control inflation, which is now beginning to return to target levels, leading to a turn in the interest-rate cycle with continued spending expected throughout 2025. With inflation under control and interest rates returning to long-term trend levels, this will give CEOs and private equity leaders more confidence around valuations and the broader economic outlook, which will potentially help drive the M&A market in 2025.

 

The data centre market in India has witnessed significant investment attracting investment commitment in excess of US$60 billion between 2019 and 2024 from global operators, real estate developers and private equity funds. It is anticipated that this theme will continue and cumulative investment commitment in the data centre sector in India will surpass US$100 billion by the end of 2027.^[36]

 

The merger between Aster DM Healthcare Limited, an integrated healthcare service provider and Quality Care India Limited, backed by Blackstone and TPG, which is currently under process, will create one of the top three hospital chains in India; this demonstrates that similar to last few years, consolidation and platform deals will remain key trends in 2025.

 

In 2024, regulatory shifts were central to India’s evolving business landscape, with key changes such as the abolition of angel tax and the release of draft data protection rules. These developments underscore India’s commitment to improving the ease of doing business, and they will continue to shape transaction structuring and documentation in 2025. Key sectors such as defence, aviation, financial technology, artificial intelligence, electric vehicles and green energy, and infrastructure are expected to see the most M&A activity in the coming years.

 

Footnote

[1] https://www.pwc.com/gx/en/services/deals/trends.html#geopolitics-accordion-trade-policy-and-tariffs-could-spark-inflation
[2] Grant Thorton, Annual Deal Tracker 2024 20th Edition.

[3] Grant Thorton, Annual Deal Tracker 2024 20th Edition.

[4] https://www.thehindubusinessline.com/economy/indias-ma-activity-drops-to-4-year-low-at-805-billion-in-2024-deal-volume-rises-33/article69092080.ece

[5] Grant Thorton, Annual Deal Tracker 2024 20th Edition.

[6] https://inc42.com/features/esop-buybacks-3000-startup-employees-made-over-inr-1450-cr-in-2024/`

[7] https://www.bain.com/insights/looking-back-m-and-a-report-2025/

[8] Grant Thorton, deal tracker 2024.

[9] Grant Thorton, deal tracker 2024.

[10] https://www.ey.com/en_in/newsroom/2025/01/pe-vc-investments-in-2024-cross-us-dollor-56-billion-helped-by-an-all-time-high-volume-of-1352-deals-ey-ivca-report

[11] Grant Thorton, annual deal tracker 2024.

[12] https://www.lexology.com/library/detail.aspx?g=b699c728-ecf7-406a-94b3-8583c33785b1

[13] https://www.lexology.com/library/detail.aspx?g=c135899a-5fdb-49b1-8e5d-1aa025405d7a

[14] https://practiceguides.chambers.com/practice-guides/acquisition-finance-2024/india

[15] ibid.

[16] ibid.

[17] ibid.

[18] https://www.lexology.com/library/detail.aspx?g=a3ad9a75-84cb-4617-847f-a1b1c2af27f4

[19] https://practiceguides.chambers.com/practice-guides/acquisition-finance-2024/india

[20] https://www.reuters.com/business/finance/indias-central-bank-begins-unwinding-curbs-nbfcs-2025-01-09/

[21] RBI/2024-25/90 A.P. (DIR Series) Circular No. 19 dated 11 November 2024

[22] Schedule II of NDI Rules.

[23] https://www.ey.com/en_in/technical/alerts-hub/2024/12/introduction-of-framework-for-reclassification-of-fpi-to-fdi#:~:text=The%20framework%20essentially%20provides%20an,below%20the%20ten%20percent%20threshold

[24] https://www.sebi.gov.in/legal/regulations/dec-2024/securities-and-exchange-board-of-india-issue-and-listing-of-non-convertible-securities-regulations-2021-last-amended-on-december-11-2024-_89954.html

[25] https://www.ey.com/en_in/newsroom/2025/01/pe-vc-investments-in-2024-cross-us-dollor-56-billion-helped-by-an-all-time-high-volume-of-1352-deals-ey-ivca-report

[26] https://www.ey.com/en_in/newsroom/2025/01/pe-vc-investments-in-2024-cross-us-dollor-56-billion-helped-by-an-all-time-high-volume-of-1352-deals-ey-ivca-report

[27] https://www.ey.com/en_in/newsroom/2025/01/pe-vc-investments-in-2024-cross-us-dollor-56-billion-helped-by-an-all-time-high-volume-of-1352-deals-ey-ivca-report

[28] https://www.nlsblr.com/post/back-to-bharat-analysing-the-reverse-flipping-merger

[29] https://dx.doi.org/10.2139/ssrn.4999362

[30] https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=NDc2MDYwMTMx&docCategory=Notifications&type=open

[31] https://www.lexology.com/library/detail.aspx?g=c68d45f3-6e66-4a8a-ba65-ab7cfd8f992fhttps://pib.gov.in/PressReleasePage.aspx?PRID=2046086

[32] https://pib.gov.in/PressReleasePage.aspx?PRID=2046086

[33] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2007876

[34] ibid

[35] https://www.business-standard.com/finance/news/finmin-proposes-to-raise-insurance-fdi-to-100-composite-licence-provision-124112801186_1.html

[36] https://mktgdocs.cbre.com/2299/e48f2c74-633a-4c59-8419-8fffeb1f2c33-1678828295/2024_India_Data_Centre_Market_.pdf

 

This article was originally published in Lexology on 15 April 2025 Co-written by: Raghubir Menon, Regional Practice Head – M&A and Private Equity, General Corporate; Taranjeet Singh, Partner; Ketayun Mistry, Associate; Niyati Karia, Associate; Mihira Jaggi, Associate. Click here for original article

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