Notwithstanding volatility in the world economy, India is a clear target market for increasing numbers of global businesses. More than nine out of ten (95%) respondents to the survey expect South Asia – dominated by India – to see an increase in M&A activity over the coming years.
India appears to have become markedly more attractive to international investors under the leadership of Prime Minister Modi, who is widely perceived as pro-business.
Alan Montgomery, head of India M&A at Herbert Smith Freehills in London, says the Modi government has certainly prompted a boost in interest in Indian deals, even if the pace of reform has not been as quick as some had hoped – not least because the government does not control the upper house of the country’s parliament.
“The government has not yet been able to make the transformational changes that everyone expected,” Montgomery says. “However, they have done an exceptional job at communicating to the international investment community that India is ‘open for business’ and where they have been able to introduce policy changes to boost overseas investment they have done so. The aggregate of these smaller changes have really helped boost inbound interest. The relaxation of foreign direct investment policy has been a particular focus: we’ve seen a number of sectors opening or continuing to open up to overseas investors, including defence, insurance, rail, construction and broadcasting for example.”
The financial services sector has been particularly busy. According to Mergermarket data, financial services deals in India saw an increase of 52% to 41 from 2014. Of these, 66% of deals came from overseas, including, for example, the US$342 million acquisition of a further 23% stake in Reliance Life Insurance, which increased Japan-based Nippon Life Insurance’s stake to 49%.