India Economic Update
Milind S. Kothari
Managing Partner
BDO India

As the country gets back on its feet to the dawn of economic revival post a heavy battering of the second wave, this time, the revival of services have been slow. At the same time, the bounce-back is visible more in the industry, which is otherwise contact-intensive as it continued to operate throughout the second wave.

In the April-June quarter of this year, the GDP posted growth of 20.1% compared to the vertical dive the economy had taken with a decline of 24.4% in the corresponding quarter during FY 2020-21. The common consensus is that the full-year GDP growth would be a shade lower than double-digit, at 9.5%. The caveat to these estimates is that the entire adult population in the country would be fully vaccinated by the end of this year.

Meanwhile, the Foreign Direct Investments (FDI) into the country more than doubled to USD 20.42bn during the April-July period of the current fiscal year, a whopping 112% increase from USD 9.61bn in the same period last year. Overall, the FDI, which includes equity inflows, reinvested earnings, and other capital, rose 62% year-on-year (YoY) to USD 27.37bn during the first four months of this fiscal (April-March), as against USD 16.92bn in the corresponding period a year ago.

On the trade front, despite India’s merchandise exports growing at 45.8% YoY to USD 33.28bn in August, led by petroleum products, gems and jewellery, engineering goods, and cotton yarn, the growth pace slowed considerably to 50% as compared to the previous month. On the other hand, the imports rose sharply at USD 47.09bn, driven by gold, creating a wider trade deficit of USD 13.81bn compared to USD 8.2bn a year ago. The imports of India’s favourite metal and the rising demand of oil on a strong brent index saw imports surge by 80.64% to USD 11.65bn.

In August, the Finance Minister, Ms Nirmala Sitharaman, announced an ambitious plan to monetise public infrastructure projects to the tune of USD 80bn over the next four years until FY25. In this fiscal year, the Government expects to realise USD 12bn through this process. The unlocking of proposed value involves more than twelve ministries and twenty asset classes. The sectors included are roads, ports, airports, railways, warehousing, gas and product pipelines, power generation and transmission, mining, telecom, stadiums, hospitality, and housing. The precondition is that such assets put up for investment to the private sector and global investors, need to be mandatorily handed back to the Government after a defined period of 25-30 years.

The finance minister also announced the formation of the National Asset Reconstruction Company Limited (NARCL), the name given to the bad bank, which is mandated to buy sticky loans from banks. The bulk of the USD 12.50bn loans that banks would sell are old non-performing assets that have been fully or adequately provided for by these banks, and where the value of underlying collaterals like plant, machinery, and other assets may have considerably eroded. Resolving such cases would require innovative, even aggressive, solutions that are faster and probably the best, given the specifics in each case.

Incidentally, the direct tax collections rose sharply by 47% in the first half of the current fiscal year, going past the kitty in the pre-pandemic FY20, underlining the recovery in the economy. On the other hand, the GST revenue collected continued the buoyancy for July and August, clocking over USD 15bn on an average. However, with a fiscal squeeze and several competing claims over limited budgetary resources, India’s tax-GDP ratio of 18% is about half of the advanced country average at 34%, and significantly lower than most major emerging economies, like Brazil, China, and South Africa that hover between 22% and 28%. With this core limitation, it is improbable that the Government will have the resources to spend on the optimal operations and proper maintenance of its infrastructure assets.

The Government also rolled out an online single-window platform that will offer investors end to end support, facilitate clearances at the Centre and the State level, and provide information about land banks. The system will also allow investors to monitor the approvals needed, on a real-time basis. The portal currently hosts approvals across eighteen central departments and nine states. It is expected that another fourteen central departments and five states will be onboarded by December this year, in the next phase.

The Supreme Court set a healthy precedent about arbitration in the case of Amazon-Future retail. It upheld the award that restrained Future from proceeding with the sale of assets to Reliance, an Indian company. It also legitimised arbitration to prevent future situations in which an arbitration award is argued to be a nullity, on some ground or the other.

With the economy back on the growth track, Indians have a lot to thank the heavens for, including a full monsoon that would guarantee a good harvest that is core to the agriculture sector, one of the largest employers in India.

M & A Tracker
Rajesh Thakkar
Partner and Leader

M&A Tax and Regulatory

Deal Advisory Services

M&A in India

Between August 2021 to September 2021, around 120 M&A deals were announced of which 75 M&A deals were completed. The aggregate value of deals announced is USD 8,853.55mn; dominated by 80 domestic deals (USD 7,733.52mn) followed by 40 cross border deals (USD 1,120.03mn).

In terms of sectors (considering only closed deals), the Industrials sector saw the maximum deal value, with deals worth USD 503.73mn followed by the Healthcare sector with deals worth USD 196.96mn and the Consumer Discretionary sector with deals worth USD 108.12mn.

Significant Deals completed between August 2021 to September 2021

Target Company
Spoton Logistics Private Limited
Acquiring Company
Delhivery Private Limited
Deal Value (in mn USD)
  • Delhivery Private Limited (Delhivery) acquired Spoton Logistics Private Limited (Spoton) for USD 235.85mn (INR 17.50bn)
  • The acquisition would help Delhivery strengthen its existing B2B capabilities and emerge as one of the largest express less-than-load solution providers in India and serve new clients and industries
  • The transaction aligns with Delhivery’s objective of being growth-oriented and building scale in each of its business lines
  • Post-acquisition, Spoton operates as a wholly-owned subsidiary of Delhivery
Target Company
Ambri Inc.
Acquiring Company
Goehring and Rozencwajg Associates LLC, Reliance New Energy Solar Limited, Fortistar, Japan Energy Capital 1 L.P., Paulson and Co. Inc., Bill Gates
Deal Value (in mn USD)
  • Reliance New Energy Solar Limited, Paulson & Co. Inc., Fortistar, Goehring & Rozencwajg Associates LLC, Japan Energy Fund, Bill Gates, and others invested USD 144mn (INR 10.65bn) in Ambri Inc. (Ambri)
  • The investment would help Ambri commercialise and grow its long-duration energy storage systems business globally
  • With this strategic investment, Reliance and Ambri also plan to set up a large-scale battery manufacturing facility in India to help add scale and bring down costs for Reliance’s green energy initiative
Target Company
Akna Medical Private Limited
Acquiring Company
API Holdings Private Limited
Deal Value (in mn USD)
  • API Holdings Private Limited (API) acquired a 67.30% stake in Akna Medical Private Limited (Akna Medical) for USD 96.40mn (INR 7.06bn) in a cash and stock deal
  • As part of the acquisition, founders of Akna Medical got shares in API and additional stock options, and Lightrock, a common investor in both firms, increased its stake in API
  • Post-acquisition, Akna Medical operates as a subsidiary of API

Significant deals announced between August 2021 to September 2021 but not completed

Target Company Limited
Acquiring Company
PayU Payments Private Limited
Deal Value (in mn USD)
Information Technology
  • PayU Payments Private Limited (PayU) entered into an agreement to acquire Limited for USD 4,692mn (INR 344.12bn)
  • The acquisition will help the company bolster its PayU business, as well as sharpen its focus on India
  • The transaction will stimulate both innovation and competition within India’s digital payments industry and will make the company one of the largest players in India’s fintech payment ecosystem
  • With this transaction, the combined entity will emerge as the leading online payments provider globally and in India with a total payment volume of USD 147bn
  • The transaction is subject to approval from the Competition Commission of India and is expected to be completed by the first quarter of 2022
Target Company
Exide Life Insurance Company Limited
Acquiring Company
HDFC Life Insurance Company Limited
Deal Value (in mn USD)
  • HDFC Life Insurance Company Limited (HDFC Life) entered into an agreement to acquire a 100% stake in Exide Life Insurance Company Limited (Exide Life) for a total consideration of approximately USD 915.67mn (INR 66.87bn) in a cash and stock deal
  • The acquisition will accelerate the growth of the Agency business of HDFC Life as well as strengthen other distribution channels including broker, direct and co-operative banks. The company complements HDFC Life’s geographical presence and has a strong foothold in South India, especially in Tier 2 and 3 towns, thus providing access to a wider market
  • The transaction will give customers access to a wider bouquet of products and service touchpoints and employees and agents will also benefit from a larger, stronger organisation that realises the synergies arising out of complementary business models built on a similar ethos
  • The transaction is subject to shareholders’ approval and customary conditions such as regulatory approvals and is expected to be completed before 30 June 2022
Feature Story
Samir Sheth
Partner & Head Deal Advisory Services

Sector Compass – What’s driving India’s economic growth engine

The COVID-19 pandemic created umpteen uncertainties around the economic growth of the country. While we are still far from returning to normalcy, the way the Indian economy has gained momentum and rebounded is remarkable, depicting a virtual V-shaped recovery.

India is rapidly scaling up its infrastructure in order to sustain this profound growth. There are myriad opportunities across sectors viz. Manufacturing, Information Technology, Energy, Professional Services, Life Science & Healthcare, Education, Retail, etc. offering investors various avenues for sustainable investments and businesses opportunities for growth and expansion.

The Sector Compass focuses on 3 key sectors i.e., Technology, Pharmaceutical /Healthcare, and Specialty Chemicals, which have/ are seeing and will continue to see good traction, in the months ahead.

Technology Sector
Ranked amongst the top 5 sectors in the country, the Indian IT sector has been one of the major contributors to the country’s GDP. It not only is a source of foreign exchange income for the country but is also a significant employment generator. India is also home to a host of Unicorns; currently, there are about 100 unicorns in India, out of which about 20 have earned this tag in 2021.

India is a huge consumption market. With the literacy rate improving year on year, the use of technology is only growing. In addition, the pandemic has propelled the reliance on technology, like never before.

Despite the global downturn in 2020, India witnessed some marque deals in this space. It has seen a rush of large IPOs in 2021 from the technology sector – Zomato, Paytm, Policy Bazaar, Oyo, etc. Such fabulous public markets entry will further encourage M&A and fundraising activity in the sector.

Ed-tech, Fin-tech, and Consumer-tech are some of the sectors that have gained prominence lately. This is no surprise considering the way the world is functioning in the new normal under the shadow of the pandemic. A new breed of Indian Thrasios such as Globalbees, Upscalio, Mensa, Evenflow, etc., are leading the consolidation race in the Indian e-commerce/ consumer tech space. The Government of India’s National Education Policy, as well as increased budgetary allocation from USD 11.3bn in 2018-19 to USD 13.2bn in 2020-21, will only see more activity in the Ed-tech spacei .

Pharmaceutical & Healthcare
India plays an important role in the global Pharmaceutical and Healthcare sector (P&H sector) and has been a prime source for manufacturing/supply of generic medicines across the globe owing to which, there has been a steady flow of FDI in this sector. The Indian P&H sector is expected to reach USD 372bn in 2022 (from USD 110bn in 2016) of which, the pharmaceutical domestic market alone is estimated to reach ~USD 120bn by 2030 (According to the Indian Economic Survey 2021).

Further, India has been excessively relying on China for Active Pharmaceutical Ingredients (APIs) or bulk drugs. However, because of disruptions to supply chains post the pandemic, pharmaceutical companies hope to insulate their supply chains from such shocks in the future, by becoming self-dependent. This situation will pave the way for domestic companies to enter the API space and encourage global companies to acquire pharmaceutical companies in India.

To boost domestic production, the Government of India has identified a few sectors where it proposes to provide incentives to corporates in these sectors -Pharmaceutical being one of them. The pandemic unearthed the current state of the country’s healthcare system and brought to the fore the dire need to build healthcare infrastructure across the nation, leading us to expect new investments here.

The drugs and pharmaceuticals sector attracted a cumulative FDI inflow worth USD 17.99bn between April 2000 and March 2021ii. The total value of M&A transactions in the P&H sector for FY2020 and FY2021 (together) amounted to USD 4.06bn.

Speciality Chemicals
The specialty chemicals market has emerged as one of the most crucial chemical segments across the globe. This segment has been dominated by large players such as Dow Chemicals, BASF, Bayer, Evonik, to name a few. These market participants have been aggressive in their inorganic growth strategies. The global specialty chemicals market was valued at USD 711bn in 2019 and is projected to reach USD 953.9bn by 2027, growing at a CAGR of 5% from 2020 to 2027.

The Government of India recognises the Indian speciality chemicals sector as a key growth contributor, adding significantly to the country’s GDP. The sector is expected to grow at a CAGR of 12.4%, from USD 32bn in 2019 to an estimated USD 64bn by 2025. The growth is largely attributable to factors like:

  1. Availability of surplus capacity and low-cost manpower
  2. De-risking dependence on China by the MNCs
  3. Huge potential in the domestic market

With the Indian Government’s Aatmanirbhar Bharat initiative and the macro-political climate, this sector is set to witness large deal opportunities, both organic and inorganic.

Guest Column
Arjun Warty
Head of Corporate Development (Including M&A and Investor Relations)
Zensar Technologies

Sector Compass - IN FOCUS: The Indian IT sector

The pandemic has left its mark in more ways than one. Apart from the heart wrenching-devastation and loss of life, it also affected livelihoods, businesses, economies, and revolutionised normal as we knew it. The pandemic also had profound impact on the IT industry which has consequently given rise to some distinct trends that are likely to influence our futures.

Early in the pandemic, successful businesses realised that they would have to adapt to new models in order to continue servicing customers. Their ability to adapt was significantly driven by the maturity of their IT systems and where they were, on their digital transformation journey. Businesses with resilient and flexible IT systems found it easier to adapt to the shocks of the pandemic and successfully met the needs of their customers. Businesses that were still lagging in their digital transformation journey (or were yet to begin) realised that they would need to accelerate these initiatives if they wanted to survive the pandemic and emerge from it with the ability to target the growth that was likely to follow.

While some early adopters have made considerable progress in their digital transformation, many other businesses are still in early stages of their journeys. This is a view backed by Cloud providers, IT services players, and IT analysts who are broadly in agreement that many businesses are still in the early stages of the digital transformation journey. Given the varied paces of digital adoption, IT spends are likely to increase significantly in the near term as these businesses transform to survive and thrive in a changing business environment. While there may be some variation in the quantum of growth, initial trends suggest that IT spends are likely to increase across most verticals and geographies.

These factors present an extraordinary opportunity for the IT industry to capitalise on, and we have seen a major, global uptick in the demand for IT professionals with the skills needed to drive these transformation initiatives. Increased demand for talent, compounded by the lean bench strength and reduced fresh graduate hiring seen through the pandemic, has led to a significant shortage of IT talent. The gap in the supply and demand of these critical skills has resulted in higher attrition and wage inflation across the industry as IT firms struggle to hire the right people to meet this demand. The talent shortage is so severe that firms are having to turn down business and are seeing business margins get hit by higher costs required to hire and retain talent. The industry is already working to address this issue through upskilling associates to equip them with the right skills, in addition to hiring and training of fresh graduates.

With its large talent pool, India is one of the best sources for meeting this growing demand for skilled IT talent and that is likely to give firms with a large offshore presence in India a clear advantage, as they try to increase their talent supply. Coupled with the increased acceptance of remote working, as a result of the pandemic, India-based firms are in a unique position to capitalise on the increase in IT spend.

Expert Reel


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