India Economic Update
Milind S. Kothari
Managing Partner
BDO India

The dramatically changed geopolitical equation exacerbated by the Russia-Ukraine war has precipitated a new era of economic uncertainty globally, and India is not spared. The known devils - high inflation, interest rate hikes, and spiralling fuel prices once again occupy centre-stage in economic management. Unsurprisingly, none of the elements were even on the radar a few months ago.

The first to be hit are the GDP growth estimates. India’s economy was likely to have grown between 3.5-5.5% in the fourth quarter of fiscal year 21-22 (April 21 to March 22). However, higher commodity prices hit margins, and the third COVID-19 wave disrupted the recovery. As a result, the International Monetary Fund (IMF) has pared the growth forecast for fiscal year 22-23 to 8.2% from the earlier forecast of 9%, citing weaker demand, as high crude oil prices weigh on private consumption and investment. The drop in estimates is based on deteriorating global economic prospects and worsening external positions, particularly for net oil importers such as India. Likewise, the World Bank cut India’s growth forecast to 8 from 8.7% as estimated earlier. Despite the downward revisions, India will remain the fastest-growing, major economy. As a benchmark, the global economy will grow at 3.6% in 2022, slower than the 4.4% forecast earlier.

Due to the significant dependency on crude imports to feed consumption, high fuel prices directly impact the inflation rate and prices. However, the aim remains to decouple the rise in domestic fuel prices along with rise in international prices. A few weeks earlier, the Central Government slashed taxes on fuel by 8%, and the expectation is that the States would follow suit and drop their share of the taxes. The assumption is that the cut in taxes will cool inflationary pressure.

The immediate impact is also seen in the depletion of foreign exchange reserves to USD 593bn from the all-time high of USD 642bn. Insofar as the investments are concerned, the Government will need to come up with higher capital expenditure, healing the scars of the pandemic. The accentuated investment envisaged in the health and productivity of human capital should eventually encourage private investment. The planned Capex during the current fiscal year 22-23 is USD 100bn as compared to the revised estimate for the earlier year at USD 80bn.

In these gloomy times, a silver lining is the achievement of the asset monetisation target. Against the original target of USD 11.50bn set for fiscal year 21-22, the actual achievement is probably well over USD 13.50bn. The target for the next fiscal year is an ambitious USD 22bn. Further, nearly USD 80bn has been set as a target for four years, beginning August 2021. The identified assets include roads, power transmission & generation, gas pipelines, warehousing, Railways, telecom, twenty-five airports, thirty-one projects in nine major ports, coal and mineral mining, sports stadia, and redevelopment of colonies.

Having to cope with these challenges, the Government’s pursuit of the ‘reforms’ agenda may see a slowdown. Along with the production-linked incentive (PLI) schemes, lowering logistics costs and the compliance burden is top priority. During these eight years of governance by Prime Minister Mr Narendra Modi, digitisation received a massive push that permeated all governance forms. However, it is still work-in-progress. The whopping success of the introduction of digital payments is to be succeeded by digital lending that would help credit penetration. The States are expected to follow suit by implementing the National Infrastructure Pipeline (NIP) by ensuring land availability with timely approvals.

As Mr Modi’s Government begins its ninth year at the Centre, the record of achievements has been outstanding on the economic front. However, the road ahead is treacherous due to the weight of global uncertainties. Redemption is a stable leadership that will likely be tested heavily in the coming months.

M & A Tracker
Rajesh Thakkar
Partner and Leader

M&A Tax and Regulatory

Deal Advisory Services

M&A in India

Between 30 March 2022 to 29 May 2022, around 157 M&A deals were announced of which 67 M&A deals were closed. The aggregate value of deals announced is USD 83,842.86mn; dominated by 114 domestic deals (USD 78,207.32mn) followed by 43 cross border deals (USD 5635.54mn).

In terms of sectors (considering only closed deals), the Industrial sector saw maximum deal value worth USD 2075.12mn followed by the Consumer Discretionary sector with deals worth USD 188.49mn and the Materials sector with deals worth USD 114.16mn.

Significant deals closed between 30 March 2022 to 29 May 2022

Target Company
Adani Group, 3 Portfolio Companies
Acquiring Company
International Holding Company PJSC
Deal Value (in mn USD)
  • Abu Dhabi’s International Holding Company PJSC to invest USD 2,000mn as primary capital in three Adani portfolio companies – Adani Green Energy Limited, Adani Transmission Limited, and Adani Enterprises Limited, through the preferential allotment route.
  • The capital is expected to be utilised for pursuing the growth of the respective businesses, further strengthening of the balance sheet and for general corporate purposes.
Target Company
Ras Al Khaimah Co.
Acquiring Company
Ultratech Cement Ltd.
Deal Value (in mn USD)
  • UltraTech Cement Limited (UltraTech), through its subsidiary UltraTech Cement Middle East Investments Limited (Subsidiary Company), acquired 29.39% stake in Ras Al Khaimah Co. for USD 101.10mn (INR 7.67 bn).
  • The investment is claimed to be a strategic investment and post transaction, UltraTech and its subsidiary company will together hold 29.79% in Ras Al Khaimah Co.
Target Company
Northwest Universal Education Private Limited
Acquiring Company
Great Learning Education Pte. Limited
Deal Value (in mn USD)
Consumer Discretionary
  • Great Learning Education Pte. Limited (Great Learning) acquired Northwest Universal Education Private Limited (Northwest Universal) in a cash and stock deal for USD 100mn (INR 7.63bn).
  • The acquisition will lead to cost optimisation for the two companies along with product synergies.
  • Post the transaction, Northwest Executive Education Pvt. Ltd. would operate as a subsidiary of Great Learning. Further, Northwest would continue to work independently, while its cofounders Mohit Jain, Tamhant Jain and Maitreyi Singhvi would continue to lead the company.

Significant deals announced between 30 March 2022 to 29 May 2022 but not closed

Target Company
Housing Development Finance Corporation Limited
Acquiring Company
HDFC Bank Limited
Deal Value (in mn USD)
  • Housing Development Finance Corporation Limited (HDFC) to be merged into HDFC Bank Limited (HDFC Bank) for USD 64,000mn (INR 4,690.93bn) with a share issuance ratio of 42 shares of HDFC Bank (FV Re. 1/- each) for 25 shares of HDFC (FV Rs. 2/-each).
  • With this transaction, HDFC Bank will own 48% in the life insurer, about 50% in general insurance and 69% in the Asset Management Company (AMC) entities of the group.
  • HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.
  • The combined entity will benefit from adding a large portfolio of mortgages amid a spike in demand for home loans.
Target Company
Ambuja Cements Limited
Acquiring Company
Adani Enterprises Limited
Deal Value (in mn USD)
  • Adani Enterprise Limited (Adani) through Endeavour Trade and Investment Ltd., entered into a definitive agreement to acquire 89.11% stake in Ambuja Cement Limited (Ambuja Cements) for a total consideration of USD 8,808.70mn (INR 681.26bn) through share purchase agreement followed by an Open offer.
  • As part of the transaction, Adani will acquire 54.53% stake in ACC Limited (ACC), of which 50.05% is held through Ambuja Cements and 4.48% stake is held directly in ACC.
  • With this acquisition, both Ambuja and ACC will benefit from synergies with the integrated Adani infrastructure platform, especially in the areas of raw material, renewable power, and logistics, where Adani portfolio companies have experience and deep expertise.
  • The acquisition will propel Adani Group to become the second-largest cement maker in India after Aditya Birla Group’s UltraTech Cement Ltd.
Feature Story
Dipankar Ghosh

Partner and Leader Sustainability & ESG

Business Advisory Services

ESG - A trend driving business changes

The global context of ESG has evolved rapidly over the past decade and the response from businesses has also progressed significantly. Once a matter of compliance or license to operate, transformed over time into an absolute necessity for business continuity.

Business leaders across industry sectors and regions now understand the contribution of good ESG practices in building a sustainable enterprise. Decisions that used to be solely guided by financial considerations, progressively embraced non-financial criteria, including Environmental, Social and Governance (ESG) parameters. The purpose of business, instead of focussing solely on monetary profit, expanded to the creation of value across non-financial considerations as well.

When organisations face uncertainties due to constraints of resources, volatility of energy price, stricter environmental regulations, supply chain challenges, capital crunch and cross-border non-tariff barriers, leaders realise the vulnerability of a business from inevitable external factors aggravated by mankind’s relentless pursuit of economic development, often ignoring the need for striking the balance.

In recent times, among various ESG constituents, climate change and its implications are considered as key concerns impacting business most perceptibly. Mitigating climate risks and creating adaptive capacities for building resilience across operations as well as value chains have been the top-most priorities of many enterprises, especially those depending on natural/agro resources, situated in climate-vulnerable regions, thereby either subjected to physical climate risks or susceptible to transitional risks from changing regulations, climate levies or customer preferences. There are several recent examples where employees advocated stronger climate responses from their own companies, compelling business leaders to adopt low-carbon policies and practices, paving pathways to net-positivity, underlying the fundamental need of giving back more than what is fetched. 

Capital providers to businesses recognised the value of investing in businesses that attempt to manage sustainability in a structured manner, and therefore many matured investors adopted definitive frameworks to assess potential investees’ ESG performance, clearly demonstrating their shifting preference from short-term profiteering to sustained prosperity over a longer period.

Such imperatives – both external and internal – compelled businesses to redefine their purpose, often prioritising long-term objectives over immediate financial gains. Discovering ESG risks inevitably led to building robust, sustainable and resilient business models which support effective risk mitigation as well as unearthing new business opportunities. Disclosure of non-financial accomplishments gained ground over and above the need for financial reporting, which led many organisations to transition to integrated reporting – a framework that emphasises the creation of value across capitals.

The transition to a low carbon, sustainable and circular economy is the new world order that is transforming businesses today, and collaborations within and across sectors are viewed as the strongest enabler. Business leaders’ views are often unanimous on the effectiveness of such collaborations which could include sharing of resources, co-investments into research and innovations, policy advocacy or transfer of know-how.

The use of technology in strategising and implementing ESG in a business context has shown exemplary progress in recent years. Data analytics, AI and other tools are supporting predictions and aiding in appropriate decision making for the future. Advance climate models and scenario analysis support businesses to understand co-relations between actions and implications. Across sectors, the deployment of technologies like IoT, the digital twin and artificial intelligence have aided sustainable renovations and will continue to do so in the future.

The definitive focus on integrating ESG into business is expected to create a transformative and long-lasting change that the world deserves, where economic development and human priorities do not contradict but complement each other.

Guest Column
Mukund Rajan

Chairperson of the Environment Committee of the Federation of Indian Chambers of Commerce and Industry (FICCI),

Chairman at ECube Investment Advisors Private Limited

Drivers of Change in ESG Investing in India

Environment, Social and Governance (ESG) is a term which has entered the lexicon in a big way over the past two years. ESG issues are seen to critically influence the sustainability of businesses, with their performance on material ESG criteria offering insights into their resilience in difficult times. And there have been no more difficult times in recent history than that which the world has experienced with the COVID-19 pandemic.

The pandemic and emerging global environmental issues such as global warming induced climate change represent existential crises for humankind. They come at a time when better science, sophisticated communications technology including social media networks, and ubiquitous access to the world wide web make it possible for communities of interest around the world to appreciate the gravity of the challenges that lie ahead and exchange perspectives on approaches to resolve these.

It is in this emerging new context that ESG investing is becoming increasingly relevant and the preferred option for growing numbers of institutional as well as retail investors. These investors are also tending to experience good risk-adjusted returns on their investments, with considerable academic literature now showing the correlation between a greater focus on ESG and greater resource use efficiency, lower cost of operations, reduced risk, lower cost of borrowing and greater prospects for valuation rerating. 

Already, over USD 43tn of funds around the world are classified as Sustainable or ESG Funds, pursuing investing strategies ranging from negative or exclusionary screening, a very common approach where investors exclude certain sectors, companies or business practices based on ESG criteria (for instance companies involved in tobacco or alcohol), to ESG integration, where investors systematically include ESG factors in their financial analysis. Separately, over USD 120tn of invested funds around the world have now subscribed to the United Nations Principles for Responsible Investment or the UNPRI, which require investors to incorporate ESG issues into their investment analysis and decision-making processes. 

In contrast to the global markets, the number of Mutual Funds currently classified as ESG Funds in India is under a dozen, with total assets under management below USD 2bn. However, these funds can take heart that their strategies are relevant, based on the performance of the MSCI India ESG Leaders Index. This index has consistently outperformed the broader benchmark index for most periods since its inception in 2007, including the past three, five and ten year periods. Similar consistent outperformance is witnessed with the NSE’s Nifty 100 ESG Index when compared with the Nifty 100 Index.  

Besides the demonstrated performance of ESG indices, what else is likely to change the fund flows to ESG investing in India? First, the growing conviction of large numbers of investors, including private equity and venture capital funds, that an ESG focus makes sense both from a risk mitigation perspective, as well from the perspective of the opportunities ESG issues such as climate change, present across emerging domains like energy efficiency, electric mobility, renewable energy, green construction and the like.

Increasing numbers of high net worth individuals are also embracing a focus on specific domains where they can create a strong ESG-linked impact, such as climate technology or health care. On the retail end of the spectrum of investors, Gen Z and many millennials seem to demonstrate a strong affinity for ESG-linked causes, including in their consumer behaviour and are likely to influence the pattern of investing in favour of ESG funds.

Activist funds have so far had limited success in India, with Elliot Management’s influence over capital allocation by a company like Cognizant in the IT services domain some years back standing out for its rare success.  However, with Stewardship Codes being introduced by the regulators for mutual funds, pension funds, and insurance companies in India, and with stronger minority shareholder protection enacted by the government, it is likely that greater activism will ensue, with collaboration amongst investors to drive ESG-friendly changes in Indian businesses. The number of ‘against’ votes on proxy resolutions by such institutional investors has been steadily rising in recent years, with several prominent brand names from the corporate world facing a backlash on issues such as CEO pay and re-election of directors.

The mandatory preparation of Business Responsibility and Sustainability Reports (BRSR) by the top 1000 listed companies from this fiscal, required by the public market’s regulator SEBI (Securities and Exchange Board of India), will further assist the cause of ESG investing in India. The BRSR framework will make ESG data more transparent to the market, and allow ESG Rating Providers, including new home-grown entities, to enlighten investors and facilitate the creation of bespoke ESG products.      

Foreign investors in India from markets like the European Union are already governed by new Sustainable Finance Disclosure Regulations that require them to assess the ESG performance of their portfolio investments. These investors will help to raise the bar on ESG investing for domestic investors, including catalysing the adoption of a green taxonomy for the Indian market.

In sum, the ESG investing story in India, while still nascent, can be expected to grow swiftly during the rest of this decade.

Expert Reel

ESG is a catch-all term for investing strategies that consider a company’s environmental, social and governance factors. ESG investing is predicted to surge and investors are increasingly holding companies accountable for their performance on environmental, social and governance benchmarks—or ESG, for short. Here's how ESG investing could transform the financial and business industry.


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