India is becoming an attractive investment market for inbound mergers and acquisitions (M&A) in the Asia-Pacific, according to a report by Kroll and Mergermarket. The report points to a favourable economic and demographic conditions, plus an encouraging regulatory regime. Since 2011, inbound transactions have trended up, and India's become a leading destination for global foreign direct investment, ahead of regional economic rival China, it said.
India attracted six per cent of all US outbound M&A transactions (deal volume) in 2015, surpassing the two per cent of outbound M&A directed at China that year as per the Kroll and Mergermarket report (the former is a global risk mitigation entity and the latter is a deal tracking one).
So far in 2016, India has continued to attract US interest, with $3.1 billion through 27 deals, compared to similar US investment in China at $1.3 bn and 13 deals.
“General sentiment among foreign investors for Indian investment opportunities remains strong, creating a bright outlook for inbound M&A through the rest of this year and into 2017. As the pipeline of deals grows, foreign investors are reminded to deploy a due-diligence process that is rigorous, comprehensive and truly independent - one that will assist them in making decisions with confidence and to be in a better position to protect such investments,” said Reshmi Khurana, head of South Asia for Kroll.
Against a backdrop of global volatility, widespread uncertainty and a fragile geopolitical situation in many regions, inbound deal flow in India has increased steadily. In 2015, inbound M&A totaled 227 deals worth $19.6 bn. In the first half of this calendar year, 82 deals worth close to $9 bn were announced, putting the country on track for another banner year of such investment.
Investment into India over the past two years has been led by the US, UK and Japan, which should instill further confidence in India -- all three countries are known for strong regulatory oversight, a culture of in-depth due-diligence and a business environment that seeks growth in international markets, said the report.
Given the country’s advantages, corporations globally are raising their exposure to India. Some are taking the organic route and building on-the-ground businesses from the bottom-up and through alliances. Others will remain more aggressive, inorganically expanding in the market but remaining cautious of a global slowdown, sluggish commodity prices and a deceleration in economic activity in key emerging markets.
"Numerous analysts suggest that India has potential to overtake China as India's growth appears to be accelerating while China's growth continues to slow down. In addition, India is expected to rebalance its growth from services driven sectors to export-oriented manufacturing and this, combined with the ongoing removal of much of the bureaucratic red tape, will arguably drive further interest from foreign investors," said the report.
Source: Business Standard