A comparison of M&A laws: India

    By Raghubir Menon, Jeel Panchal, and Ketayun Mistry, Shardul Amarchand Mangaldas & Co







    M&A activity witnessed a return to pre-pandemic levels globally in 2022 with businesses seeking long-term investments at attractive valuations and returns. As a result, India became a desirable location encouraged by government efforts to increase corporate efficiency and implement progressive reforms; while Indian businesses reached scalable levels for investment and buyout.

    Raghubir Menon
    Raghubir Menon
    Partner and Regional Head of M&A and Private Equity Practice
    Shardul Amarchand Mangaldas & Co
    Email: raghubir.menon@amsshardul.com

    India’s attractiveness resulted in surpassing all previous records of strategic M&A deal volume and value in 2022, driven by expansion, consolidation and new entries into the Indian market. Record levels of cash targeting the market along with the availability of quality assets helped deliver a boom in dealmaking, with deal values rising by 139%.

    The country’s regulatory framework provides a variety of investment paths with varied categorisations, depending on the type of investment vehicle utilised. This enables domestic and foreign investors to take advantage of India’s rapidly expanding sectors through structured transactions.

    M&A in India is predominantly governed by the Companies Act, 2013; the Foreign Exchange Management Act, 1999, read alongside the Foreign Direct Investment Policy and circulars, notifications and master directions issued by the Reserve Bank of India; the Securities and Exchange Board of India Act, 1992, along with the circulars, notifications, guidelines and directions issued by the Securities Exchange Board of India (SEBI); the Competition Act, 2022; and various rules framed under the above-mentioned acts.


    • As an essential instrument for achieving net-zero emissions, green financing is gaining traction in the Indian economy. The transition to a greener economy is being steered by initiatives like sustainable investment techniques, renewable energy assets and avoidance of carbon taxes.
    • Increased interest is seen from banks, non-banking financial companies, venture capital and private equity funds in green finance opportunities.
    • Traditional sectors including banking, financial services, insurance, healthcare, energy and manufacturing grew by 50% to around USD28 billion.
    • Environmental, social and governance (ESG) investments emerged as a breakout theme in 2022, with clean energy and electric vehicle investments leading the way, reaching nearly USD7.9 billion.


    Jeel Panchal, Shardul Amarchand Mangaldas & Co in Mumbai
    Jeel Panchal
    Senior Associate
    Shardul Amarchand Mangaldas & Co
    Email: jeel.panchal@amsshardul.com

    Along with notification of the Energy Conservation (Amendment) Act, 2022, regulators have increased their focus on ESG. Measures include authorising 100% foreign direct investment for renewable power generation and distribution projects, introducing an ESG category of mutual funds, granting a INR350 billion (USD4.3 billion) outlay for growth in the green energy transition, approving the National Green Hydrogen Mission, and mandating ESG-related disclosures under the SEBI and the business responsibility and sustainability report framework under the Companies Act, 2013.

    India has also witnessed visible traction with many ESG-focused funds making entries. For instance, Aavishkaar Capital, the Mumbai-headquartered impact investing arm of the Aavishkaar Group, announced the launch of a USD250 million ESG-first fund in collaboration with German investment and development bank KfW. The fund will focus on investing in Asia and Africa to strengthen ESG practices of mid-cap businesses, and offer them growth capital.

    Corporations are also taking steps towards ESG. For example, JSW Cement signed its first sustainability-linked loan of INR4 billion (USD50 million) with MUFG Bank India and plans to deploy these funds to achieve its capacity target of 25 million tonnes per annum with an increasing focus on sustainability.


    With an increase in private equity investments, the emergence of customised risk products, development of an experienced ecosystem of underwriters – and advisers providing solution-oriented counsel – are some of the key metrics paving the way for warranty and indemnity insurance.

    With developments in the warranty and indemnity insurance market and comfort insurers, the value proposition of the product is stronger due to reduced “deductibles” (including zero deductibles for title risks), lower insurance premiums and strong terms for the insured.


    After a decade of stable, low-interest rates and steadily rising valuations, a major concern of the M&A industry has been inflated valuations and a significant gap between investor expectations and the bid-ask from investor companies or sellers. Valuations are now returning to healthy figures as liquidity tightens around the world. Investors are undertaking due diligence on time and revising valuation metrics not only in the fintech sector but also in edtech and the fast-moving consumer goods sectors.


    • India has progressively increased the flow of money towards the ESG sector, but still faces challenges. Many sectors are unable to contribute towards ESG solely because of the nature of their product and the techniques utilised. Companies need to consciously move towards ESG and diversion of capital towards business models utilising greener sources of energy and renewables. The Competition (Amendment) Act, 2023, has also ushered in significant regulations affecting the cross-border space.
    • Scrutiny into deals and heavy fines on non-compliant conglomerates – notably Amazon and Google – points towards uncertainty and added concerns among dealmakers in respect of strict regulatory adherence and their impact on ongoing transactions.
    • In terms of data protection, India does not have a standalone law at present and usage of personal data is regulated by the Information Technology Act, 2000. With the introduction of the Digital Personal Data Protection Bill, 2022, regulators are intensifying scrutiny on the processing of digital personal data both within and outside the country for limited purposes.

    Greater attention to data protection will prompt acquirers to examine target companies’ business models to ascertain the amount of data possessed and transferred.


    Ketayun Mistry, Shardul Amarchand Mangaldas & Co in Mumbai
    Ketayun Mistry
    Shardul Amarchand Mangaldas & Co
    Email: ketayun.mistry@amsshardul.com

    Recent M&A in industries including contract manufacturing, renewables, pharmaceuticals and healthcare are being fuelled by a shift in which private equity firms, conglomerates and unicorns are acquiring assets and combining them to build platforms. For example, with strategic investment in health food brand Yoga Bar, Indian conglomerate ITC bolstered its position and quickly expanded its nutrition-driven healthy foods market. Zomato’s acquisition of delivery service Blinkit facilitated the former’s Zomato competition with its rival Swiggy, infiltrating the instant delivery market.

    Amid a surge in acquisitions of companies, some of the larger deals also include HDFC Bank and Housing Development Finance Corp nearing completion of their much-awaited and unprecedented merger via a swap of shares, creating India’s fifth most valuable bank, with a net worth of about USD168 billion. Also noteworthy is Reliance Retail Ventures’ acquisition of the cash and carry business Metro Cash & Carry India, of German retailer Metro AG, growing the retail empire of Reliance Industries.

    Corporate management teams and investors are also raising the bar on capital allocation in response to rising capital costs by divesting underperforming and non-core companies where there is less confidence in their ability to expand profitably as a member of the group organisation. Debt reduction is one of the significant reasons for divestment. For example, with Citibank losing momentum in the credit card business, its spending share fell to 6% in 2021 from around 11% in 2018. In 2021, Citibank decided to sell its retail banking business to the fourth-largest issuer of credit cards, Axis Bank, which acquired Citibank’s consumer business and non-banking financial assets business for approximately INR116 billion, adding approximately 2.5 million credit card holders, making it one of the top three card businesses in India.

    Meanwhile, the Reserve Bank of India has streamlined and liberalised the existing regulatory fabric to cover a wider scope of economic activities and reduce the need for approvals with the introduction of the Foreign Exchange Management (Overseas Investment) Rules, 2022, Foreign Exchange Management (Overseas Investment) Regulations, 2022, and Foreign Exchange Management (Overseas Investment) Directions, 2022 – collectively known as the OI Guidelines. These enhanced OI Guidelines will boost both local and international players’ trust in the government’s goal to ease dealmaking over coming decades.


    India is now a key player in the global economic landscape and is expected to become a USD5 trillion economy by 2025. This makes it an attractive market for investments and acquisitions, where the market has been growing consistently in terms of deal value. The authors now expect macroeconomic factors to decide how this year pans out. The PwC report on deals in India suggests a strong year for the energy and infrastructure sectors, manufacturing and ESG.

    In addition, financial services, technology, healthcare, energy and power, and industrials are expected to remain active in terms of both value creation and market share. When structuring M&A transactions with Indian entities, global and domestic players will need to align with legal and regulatory changes, and at the same time tie in with past precedents of dealmaking in India.

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