INDIA Trends and Developments Contributed by: Anish Mashruwala, Utsav Johri, Megha Upadhyaya and Sahil Unadkat, JSA
Overview The acquisition financing market in India has grown multi-fold in the last few years, on account of booming mergers and acquisitions (M&A). While 2023 saw some global headwinds due to global geopolitical issues, 2024 witnessed a resurgence in M&A activity in India, with a strong focus on private credit in the acquisition finance space. As per publicly available data, some key acquisition deals in 2024 that were funded through external debt include: • Hinduja Group’s acquisition of the debt-rid- den financial services firm Reliance Capital; • Mankind Pharma’s acquisition of Bharat Serums and Vaccines Limited; and • Embassy Group’s acquisition of the co-work- ing space provider WeWork. Additionally, in 2024 several refinancings of prior acquisition deals as well as transactions due to the restructuring of holdings were carried out. In spite of speculations of global economic slowdown fuelled by rising geopolitical tensions and tariff wars, the International Monetary Fund and the World Bank have forecasted India’s growth to remain solid at 6.5% and 6.7% for FY 2025–26 and FY 2026–27, respectively. It is expected that, with a strong domestic economy, a decrease in inflation and a softening of inter- est rates, M&A and private equity (PE) activity in India will remain buoyant, reflecting confidence from global businesses, PE funds and other investors. Sectors such as pharma, healthcare, technology, financial services, renewable energy, retail and e-commerce are expected to be in the spotlight. Given the predicted deal-making activ- ity in these sectors in India, acquisition financing activity is expected to continue.
The Indian legal landscape has also evolved positively, with the emergence and evolution of the insolvency regime in India, introduction of the goods and services tax laws, the digitisation drive (especially in financial services), changes in foreign direct investment (FDI) policies, and other institutional reforms. Overall, it is expected that the acquisition financ- ing space in India will benefit from the rising tide of deal-making activity. Recent Trends Domestic acquisitions The major market players for financing a domes- tic acquisition via debt remain foreign portfolio investors (FPIs) and alternate investment funds (AIFs). Previously, non-banking financial compa- nies (NBFCs) played an active role in acquisi- tion financings. However, several NBFCs have pivoted to a retail portfolio, and debt AIFs have bridged that space. The guidelines issued by the Reserve Bank of India (RBI) restrict the ability of an Indian bank to finance the acquisition of equity shares of an Indian company, save for exceptional cas- es. However, Indian banks actively finance the acquisition of targets through the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). This is because, in an acquisition under CIRP, bank financing is not utilised for funding acquisi- tion of shares but for repayment of existing lend- ers of the target company. The positive global outlook of India and strong performance of Indian debt portfolios has led to India being viewed as a favourable destina- tion for global players in the private credit space. There has also been a rapid growth of domes- tic private credit funds in India. Private credit
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