22 ASIAN LEGAL BUSINESS – JULY 2024 WWW.LEGALBUSINESSONLINE.COM INDIA REPORT Contrary to popular predictions, dealmaking in India has remained a mixed bag in the first half of 2024. While deal volume went up in the second quarter of the year, led by a busy domestic market, deal value in the first half of the calendar year actually dropped 9 percent to $38 billion as against the $41.74 billion in the same period in 2023, Bloomberg data shows. Market analysts and legal experts still maintain a positive outlook for the second half of the year, to be driven by large amount of dry powder from private equity investors, controlled inflation, robust GDP, low interest rates, and the stock market’s buoyancy. With the Narendra Modi-led Bhartiya Janata Party coming back to power for a third term, its pro-business outlook and promise of regulatory continuity has brought some relief to a jittery market, but questions remain about the coalition alliance’s ability to pass strong reforms. Foreign investment has also been hard to find, even as international funds like Blackstone, KKR, Bain Capital and Goldman Sachs look to increase investment in the country. But domestic dealmaking remains the backbone of Indian M&A, with a 29 percent rise in volumes and a 2.5-fold increase in values compared to the previous quarter. POST-ELECTION CONCERNS Legal experts anticipate sustained activity in the lower end of the M&A market, as domestic players seek market consolidation and strategically invest their substantial cash reserves. India’s largely stable outlook and strong pipeline is owed to its diversified growth, outside traditional sectors such as IT/ITES and pharmaceuticals, which also remain strong. Defence, space, aviation, financial technology, artificial intelligence, green energy, e-mobility, infrastructure, and agritech markets are also attracting a lot of domestic and foreign investment. “India’s robust capital markets present an attractive opportunity for exits via IPOs and hence continue to attract foreign funds and investors,” Shankar and Raghani explain. Varun Vaish, a corporate partner at Luthra and Luthra Law Offices India, points to the growth in technology start-ups, particularly in the agricultural space, as an attractive opportunity for investors. “Technological advancements in agriculture, including precision farming, agrifintech, and supply chain improvements, are attracting investments, and hence the agritech/agrifintech sector will certainly witness significant M&A growth in 2024,” Vaish says. “The cyber security and data protection sector is another emerging area that could be the focus of increased M&A activity given the increased investor interest in this sector post the central government’s planned implementation and enforcement of the Digital Personal Data Protection Act, 2023,” he adds. REGULATORY REFORMS Indeed, new government regulations around data protection, antitrust law, capital markets and sector-specific laws for healthcare, pharmaceuticals, space, and renewable energy are poised to spur growth in new markets. In the same vein, the government’s flagship productionlinked incentive schemes and global deleveraging from China are bringing Sidharrth Shankar and Vikram Raghani, co-chairs of the corporate practice at J. Sagar & Associates, say the remaining half of 2024 may witness some strategic small M&As between Indian and foreign partners. “The cashrich Indian business houses are also expected to strengthen their portfolios through tactical M&As,” they note. “It is noteworthy that the current coalition government may not be able to enact radical legislative reforms, but initial indicators suggest that the government will continue to liberalize laws to improve the ease of doing business in India,” they add. Anand Jayachandran, a corporate partner at Cyril Amarchand Mangaldas, says that it is business as usual for Indian dealmaking post-elections, even as investors in the government sector employ a wait-and-watch approach to see if the weaker coalition government can ensure a continuity of pro-business reforms. “Now that the dust has settled, it is largely business as usual. There hasn’t been a drop-off in deal activity, and the M&A market remains busy. The big-bang market frenzy, which was expected by some, may not happen, but we are seeing M&A based around the themes of consolidation and strengthening core businesses continue,” Jayachandran says. “In sectors and companies with significant government involvement, there is some waiting and watching to see if there will be continuity in policies as far as the new government is concerned,” he adds. MERGER MOMENTUM Despite global uncertainties, India’s M&A landscape remains robust, with domestic deals driving growth and diverse sectors attracting investments. Experts predict a positive outlook for H2 2024, bolstered by policy continuity and abundant dry powder. BY NIMITT DIXIT
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