M&A Guide 2025: India

Despite continuing global geopolitical tensions on account of the Ukraine and Gaza crises and political uncertainty ahead of general elections in several major economies in 2024 (including the US, the UK, and India), M&A activity in India remained resilient and strong last year.

According to statistics released by the Ministry of Industry and Commerce, inbound foreign investment in 2023–24 amounted to $70.95 billion. The first six months alone of the last fiscal year saw a 26% increase in foreign investment activity, amounting to a staggering $42.1 billion.

Furthermore, between 2000 and 2024, India’s gross foreign direct investment inflows crossed an impressive $1 trillion and the country remains on the ambitious path of becoming a $30 trillion dollar economy by 2047. This growth is largely credited to:

• The liberalisation/relaxation of foreign investment rules in India over the past decade;

• The improved competitiveness of Indian industries (particularly manufacturing and healthcare);

• Government stability; and

• Geopolitical advantages that India has gained over its Southeast Asian neighbours, including China and Taiwan.

In terms of the public markets, the Nifty 50 and the Sensex hit record high levels in 2024, with the Sensex touching 85,372.17 points in October for the first time. The key drivers were mid-cap and small-cap stocks, together with a renewed focus on IT, renewable energy, and banking stocks. There has, however, been a valuation reset as far as the stock markets in India are concerned and this will likely only bolster further listed/public M&A activity in India.

2024 was also dominated by blockbuster equity capital markets activity in India, notwithstanding the otherwise lukewarm listing activity in the US and the rest of the major economies (including the UK and Europe).

In terms of M&A market drivers, public and private M&A both play an important part in the Indian market, but private M&A deals make up a significant majority of the cross-border M&A deals in India. As in other jurisdictions globally, public takeover processes have a prescribed process, which is governed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the Takeover Regulations), whereas the structure and process of private acquisitions are a matter of negotiation between the buyer and seller, subject to applicable regulatory considerations (including foreign exchange investment rules and sector-specific approvals; e.g., insurance and pharmaceuticals).

Latham & Watkins’ market-leading India practice advised on a number of significant cross-border transactions involving India in 2024, including those of Hexaware, Swiggy, and Hyundai Motor India. Each of these IPOs was valued at upwards of $1 billion.

Furthermore, Latham & Watkins continued to advise strategic and sponsor investors on their complex cross-border transactions in India across a variety of sectors, such as energy, healthcare, and hospitality.

As mentioned above, India maintained resilience and strength through 2024 in terms of M&A and IPO activity.

Following the 2024 general elections in India, which resulted in a landmark third term for the Modi government, the overall M&A market remained active, with record-breaking equity capital markets deal activity. IPOs in India boomed in 2024 compared with any other global stock exchange, with the National Stock Exchange reporting a capital raise of approximately $19.5 billion, touted to be the highest in the world for 2024. As would be expected, this massive upsurge in IPOs impacted some of the planned M&A capital/fund raises, resulting in Indian targets contemplating listings as opposed to private fundraising rounds.

Building on the momentum from 2024, equity capital markets/IPOs are likely to remain active in 2025, but further growth is expected in terms of M&A activity as well.

An expected driver of activity is the pent-up demand due to a build-up of record levels of ‘dry powder’ that needs to be deployed. This factor led to a revival of competitive auction processes and increased participation by private equity (PE)/sponsors in 2024 (particularly following post-election political certainty in India). The investment organisations KKR, Blackstone, EQT, and Brookfield, among others, remained bullish about India’s growth story.

Notable transactions included Brookfield’s acquisition of ATC India Tower Corporation, the Indian arm of American Tower Corporation, for $2 billion and KKR’s back-to-back investments in hospitals/healthcare and pharmaceuticals (including the acquisition of Healthium from Apax Partners). On the other hand, Novo Holdings (the holding and investment vehicle of Novo Nordisk Foundation) announced its plans regarding the deployment of further capital in India.

Strategic M&A activity also witnessed a surge, with high-value transactions such as the Reliance–Disney merger transaction and Tata Consumer Product’ acquisition of Capital Foods.

Another notable feature of 2024, as per the Indian Venture Capital Association-EY monthly PE/VC roundup published last December, was that PE/venture capital (VC) exits were up by 7% year on year in value terms and amounted to approximately $26.7 billion. These were also driven by attractive IPO valuations, resulting in a large number of PE/VC exits.

While it was anticipated that President Trump’s term would be characterised by his pro-business approach and that it would benefit India given the US’s anti-China stance, the fact that he has also moved to introduce tariffs against India necessitates caution and may impact the pace of deal activity. How this will unfold in terms of actions taken by the Indian government, including anticipated tax cuts on imports, will need to be closely scrutinised in the days and months ahead.

There have been material regulatory deterrents to ‘take private’ listed Indian companies on account of the reverse book building mechanism that enabled price arbitrage by minority shareholders (without any monetary caps) and a 90% threshold for shareholder participation in the delisting process. Delisting or take private transactions have historically been unsuccessful and rarely pursued by Indian investors, let alone foreign investors.

In 2024, the Indian securities market regulator amended some of these onerous requirements and introduced a fixed price delisting mechanism for listed companies whose shares are frequently traded. It is still early days for this legislation, and it remains to be seen whether this will open the door to more delisting/investment opportunities for foreign investors.

Set out below are a few regulatory reforms and changes introduced by the Ministry of Finance in India pursuant to the 2025 budget that are expected to further boost investment opportunities:

• An increase in the foreign direct investment limit for the insurance sector from 74% to 100%;

• Launching a National Manufacturing Mission (to support medium and small-scale enterprises) to boost the Indian government’s Make in India initiative, which emphasises and supports self-reliance in manufacturing capabilities in India; and

• Increasing/incentivising private participation in infrastructure.

In 2024, there were approximately 105 public M&A transactions in India. These were primarily dominated by domestic strategic acquirers, with less than 10% of such transactions being undertaken by foreign acquirers. The hesitation among foreign buyers in acquiring controlling positions in Indian listed companies has been on account of a number of factors, including valuation considerations and an ongoing regulatory/compliance monitoring burden associated with listed companies in India (including regular interactions with the market regulators).

A foreign party may purchase the capital instruments of an Indian public listed company on the floor of the stock exchanges in India only if it “controls” the company, as per the Takeover Regulations. As an exception to the rule, a non-resident that does not have control of the company is permitted to invest in/purchase up to 9.99% of the share capital of listed securities on the floor of the stock exchanges if it is registered as a foreign portfolio investor.

All Indian public listed companies are required to maintain a minimum public shareholding of 25% at all times. Any acquisition by a person of 25% or more of the listed shares or voting rights results in an obligation to make an open offer to acquire additional shares. The open offer should be for at least 26% of the total share capital.

The Takeover Regulations also provide for a dual-track delisting-cum-open offer process, which has not been a preferred route for investors/acquirers because of the regulatory impediments to the delisting regime, as noted above.

As discussed, a vast majority of deals in the Indian M&A market are private M&A transactions (between domestic parties or with one or more foreign parties).

M&A transactions involving foreign parties are subject to foreign exchange control restrictions, thereby limiting the flexibility available for earn-outs, post-completion holdbacks, and other price adjustment mechanics.

Broadly speaking, in a transaction involving a foreign party as a buyer or seller, only 25% of the total consideration to be paid can be deferred, for a period not exceeding 18 months from the date of the binding transaction agreement. The consideration will be subject to a fair market valuation, which is determined as per an internationally accepted pricing methodology by a chartered accountant or merchant banker in India.

The use of warranty and indemnity insurance (particularly in PE-led sell-side auctions and other competitive processes) has increased across deals in Asia (including India). The use of specialist insurance products, including withholding tax insurance, is also becoming increasingly common in Indian deals.

In private M&A, the conditions to closing included in a purchase agreement will vary based on the circumstances of each transaction. Conditionality will include mandatory regulatory and antitrust clearances, as well as material third-party consents that are critical for business operations.

In cross-border Indian transactions, it is most likely that the parties will agree to foreign law as the governing law (commonly, English or US law, depending on the location of the parties, etc.) because these legal regimes are viewed as being stable, impartial, and commercial, with a developed litigation infrastructure. Dispute resolution is typically through arbitration under Singapore International Arbitration Centre or London Court of International Arbitration rules, with a choice of arbitration venues in Singapore or London. There is still wariness on the use of Indian courts for dispute resolution given the substantial backlog of cases, the high level of bureaucracy, and a perceived lack of impartiality.

Another trend that came to the fore in 2024 was that Indian companies more actively sought to expand their global presence, as evidenced by the nearly 17% increase in outward foreign direct investment in 2024 in comparison with 2023, reaching approximately $37.68 billion.

As an example of the growing offshore interest among Indian businesses, Latham & Watkins is advising the England and Wales Cricket Board on private investment into teams in the Hundred competition, which has attracted interest from several Indian companies and investors.

There are several reasons for optimism in the Indian M&A market this year. This positive outlook needs to be tempered by developments around tax cuts and the approach taken by the government in response to Trump’s tariff regime, but confidence is driven by:

• Interest rate and inflation stabilisation;

• The resolution of key elections;

• Pro-business pressure on regulators; and

• Pent-up demand for dealmaking as investors continue to hold record levels of cash and dry powder.

Investment in energy, semiconductors, and technology, driven by the AI boom, together with evergreen sectors such as healthcare and pharmaceuticals, will continue to be in focus. It will be interesting to see if there will be further appetite to explore delisting in the wake of recalibrated market valuations and whether there is an appetite for more innovative/creative structuring, despite foreign exchange and other applicable regulatory considerations.

* Disclaimer: This article does not purport to provide legal advice on Indian laws and is only meant to provide a summary of trends in the Indian M&A market. This is not intended to be comprehensive and the statistics are sourced from the public domain and have not been independently verified.