India Economic Update
Milind S. Kothari
Managing Partner
BDO India

The economic turmoil that began with the onset of the pandemic (now further aggravated by the Russia-Ukraine war) has been severe, especially amongst developing economies. The misfortune of India's neighbours, such as Sri Lanka, Pakistan, and Nepal, has had devastating consequences and could take them more than a generation to recover. Yet, amid this turbulence, the Indian economy seems robust and confident about keeping up its growth momentum, albeit with caution.

The strengthening of the US dollar compared to nearly all global currencies, exacerbated by the tightening of the interest rate by the US Federal bank has set in motion a currency shock that will take a long time to stabilise. The Indian rupee weakened sharply to a new lifetime low against the US currency amid sustained dollar strength. However, what is in India’s favour is that the Indian rupee is not weak against the US dollar because of any fragility in India's macro scenario. India has gained nearly 3% year-to-date against the basket comprising the G10 currencies versus its 7% loss against the US dollar.

To counter the slide in the currency, the Reserve Bank of India (RBI), India's central bank, has been intervening to slow down the pace of depreciation. But there is a case for an even more aggressive monetary policy. The RBI has initiated several measures to shore up the foreign exchange reserves, including doubling the annual overseas borrowing limits for companies to USD 1.50bn and, temporarily abolishing interest-rate caps for banks to be able to attract deposits from non-resident Indians. Opportunely, the regulations for foreign investors to invest in government and corporate debt in India have also been eased.

In July, the RBI announced an arrangement for domestic traders to settle imports and exports in Indian currency, a move aimed at facilitating trade with a sanctions-hit Russia. With the new payment mechanism, India can avoid the fall-out of the sanctions on several countries such as Russia and Iran.

With the price of crude consistently remaining over USD 100 per barrel, the vulnerability of the Indian economy once again stands exposed. The trade deficit during June 2022 swelled to a record USD 25.63bn on account of rising energy and gold import costs. A ballooning trade deficit has triggered a series of policy responses, including bypassing western sanctions on Russian energy, imposing an export duty on petroleum products, and raising tariffs on gold imports. Moreover, despite the clarion call to become self-reliant, India's trade deficit with China is rising. While imports grew by 12.75% in the first two months of this fiscal, the exports fell by 31%, widening the trade gap. As the economy is recovering, it appears that the Indian economy is more coupled with China than ever before.

On a positive note, the growth in the eight key infrastructure sectors of the economy touched a 13-month high on the back of a robust performance by all of them; amplified by the low base of the previous year. Meanwhile, the Centre's fiscal deficit nearly tripled in May 2022 to 12.5% of the full year's budget estimates in the first two months of 2022-23. The full-year deficit targeted at 6.4% is stressed because of revenue losses and additional spending on food, fertilizer, and gas subsidies. As a result, the estimated current account deficit will likely widen to 3% of GDP, nearly double that of the previous year.

Though the current scenario mandates cuts in revenue expenditure, the Government promises that there will be no rollback in the proposed capital expenditure, budgeted at USD 100bn in the current fiscal year. The finance ministry has asked key infrastructure ministries and departments to speed up projects, achieving at least 60% of the fiscal 2022-23 capital expenditure budget target by the end of September. The compelling reason to push capital expenditure is to support the economy buffeted by high inflation, geopolitical risk, and monetary tightening.

While ‘tightening of the belt’ is being witnessed across the economy, the redeeming feature of the Indian economy is its services exports that are targeted at USD 350bn in the current fiscal year, up a steep 37% from last year, despite headwinds and recession fears in the global markets. Echoing the resilience of the Indian economy, the sentiment amongst foreign investors is that India has become an easier place to do business. What has lent credence is the tremendous success of the Unified Payment Interface (UPI), the digital architecture and other frameworks that are in place.

It is acknowledged that the Government has done a remarkable job to bolster confidence that India is a place to create a centre of excellence. A vast domestic market is an added incentive.

In summary, India's economic powerhouse is poised to demonstrate its resilience and deliver a standout performance this fiscal year.

M & A Tracker
Rajesh Thakkar
Partner and Leader

M&A Tax and Regulatory

Deal Advisory Services

M&A in India

Between 30 May 2022 to 29 July 2022, around 94 M&A deals were announced of which 58 M&A deals were closed. The aggregate value of deals announced is USD 2836.56mn; dominated by 62 domestic deals (USD 1429.55mn) followed by 32 cross border deals (USD 1407.01mn).

In terms of sectors (considering only closed deals), the Industrial sector saw deals worth USD 213.25mn followed by the Information Technology sector with deals worth USD 93.05mn and the Consumer Discretionary sector with deals worth USD 75.29mn.

Significant deals closed between 30 May 2022 to 29 July 2022

Target Company
Vuram Technology Solutions Private Limited
Acquiring Company
WNS Holdings Limited
Deal Value (in mn USD)
  • WNS Holdings Limited (WNS Holdings) acquires Vuram Technology Solutions Private Limited (Vuram Technology) for USD 165mn (INR 13.20bn)
  • With this investment, WNS Holdings will accelerate the organisational journey towards digitally-led, human-assisted services and solutions
  • Post transaction, Vuram Technology will operate as a wholly owned subsidiary of WNS Holdings
  • The acquisition enables WNS Holdings to expand its intelligent automation capabilities across an entire spectrum of Business Process Management Solutions offered to its clients
Target Company
BrokenTusk Technologies Private Limited
Acquiring Company
Pine Labs Private Limited
Deal Value (in mn USD)
Information Technology
  • Pine Labs Private Limited (Pine Labs) acquired BrokenTusk Technologies Private Limited (BrokenTusk) for USD 70mn (INR 5.60bn)
  • As a part of the transaction, Pine Labs acquired around 90-100 employees of BrokenTusk and this will strengthen the online payments and lending platform of Pine Labs
  • Post transaction, BrokenTusk will retain its brand identity, business, teams and its customers
Target Company
Acquiring Company
Alexander Mann Solutions
Deal Value (in mn USD)
  • Alexander Mann Solutions (AMS) acquired FlexAbility for USD 41mn (INR 3.28bn)
  • As a part of the transaction, FlexAbility, renamed ‘FlexAbility by AMS’ will operate within the AMS global platform
  • The investment will help AMS strengthen its leadership position in the Indian market. Post transaction, FlexAbility will operate as a wholly owned subsidiary of AMS
Target Company
Accord Hotels and Resorts Private Limited
Acquiring Company
Max Estates Ltd
Deal Value (in mn USD)
Consumer Discretionary
  • Max Estates Ltd (Max Estates) acquired a 100% equity stake in Accord Hotels and Resorts Private Limited (Accord Hotels) which owns a 10-acre land parcel in Noida
  • This acquisition will enable Max Estates to develop a mixed-use residential project
  • Post the acquisition, Accord Hotels will become a wholly owned subsidiary of Max Estates

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

Target Company
Welspun Enterprises Limited
Acquiring Company
Actis Highway Infra Limited
Deal Value (in mn USD)
  • Actis Highway Infra Limited (Actis Highway) agreed to acquire Highway Portfolio from Welspun Enterprises Limited for USD 771.78mn (INR 62bn)
  • The enterprise value excludes construction-linked milestone/ grant payments of approximately USD 380mn (INR 30bn) received/receivable from the National Highways Authority of India (NHAI) and the Public Works
  • Department of the Government of Maharashtra (PWD), thus, valuing the highway portfolio being exited at approximately USD 1125mn (INR 90bn)
  • The transaction is expected to be completed by 31 March 2023 subject to certain approvals/conditions
Target Company
Blink Commerce Private Limited (Formerly known as Grofers India Private Limited)
Acquiring Company
Zomato Limited
Deal Value (in mn USD)
Consumer Discretionary
  • Zomato Limited (Zomato) to acquire quick commerce company Blink Commerce Private Limited (Blink Commerce) for USD 569.36mn (INR 45.54bn) in an all-stock deal
  • Zomato will issue and allot 628.5mn fully paid-up equity shares, having a face value of Re. 1 each for INR 70.76 each, for the acquisition of up to 33,018 equity shares of Blink Commerce
  • Post-transaction, Blink Commerce will operate as a subsidiary of Zomato and Albinder Dhindsa, the founder of Blink Commerce, will continue to lead Blink Commerce
  • The acquisition is expected to be closed by early August 2022
Feature Story
Ashish Bagadia


Corporate Finance & Investment Banking

Deal Advisory Services

India as an underleveraged opportunity

Leveraging an expanding young and working population base, the Indian economy is rapidly growing, making it an attractive opportunity for global companies to look out for. Around 67% of India’s population falls under the working age bracket and the country is now the second largest workforce in the world with the largest youth population. India has been able to deliver over 6% GDP CAGR from 2000 to 2021, which is one of the best long-term growth rates in the world, and is expected to maintain its lead.

Realignment of geopolitical dynamics, including the ‘China Plus One’ strategy of most countries, is playing a significant role in India’s expected rapid development. This global demand is well supported by the capabilities of the country.

India needs commitment, both in terms of efforts and time. It requires market participants to understand customer needs better and deliver curated solutions. Playing at the fringes does not allow the harnessing of the real opportunity that India offers.

Many companies, like Unilever, Hyundai Motors, Nestle, Akzo Nobel, Schneider Electric, etc. that created a pole position in India had entered the country when the entry barriers were high and competition was lesser.

In today’s context, when time is of the essence, an inorganic growth strategy is an imperative tool for creating market leadership in the country. In most sectors, there are only a hand full of scaled-up assets that could be acquired, requiring the acquirers to adopt the ‘String of Pearl’ strategy.

This is pertinent keeping in mind the history of global acquirers in large Indian deals facing challenges during the initial period post-acquisition. The key reasons for these have been, lack of integration planning, inability to culturally connect with the target’s team and inadequate due diligence. In many cases, the acquirer’s M&A teams manage these acquisition discussions with a cookie-cutter approach and try to tick boxes on their checklists. Not appointing local investment banks to advise them on the transaction is a common mistake made by M&A teams of overseas buyers.

Realising these challenges faced by  global companies, buyout funds in India have begun  consolidating with the objective of building clear market leaders and addressing some of these issues. For example, Advent, Bain, Carlyle, KKR, etc. have done multiple deals in the pharmaceuticals space to create platforms. A similar strategy has been deployed in various other sectors.

Earlier, buoyant IPO markets allowed financial sponsors to monetise their investments at unprecedented premiums. However, with  capital market sentiments changing, strategic exits are back on the table. The lower cost of capital for global companies continues to provide them with an advantage over domestic pools of capital.

Some of the larger funds are open to partnering with strategics at the investment stage itself, in situations wherein respective roles can be clearly defined. For example, In 2018, Amazon and Samara Capital joined hands to buy a retail chain (‘More’ supermarket) for around USD 600mn. These partnerships will allow global strategics to skirt some of the issues posed by the high-growth environment of India and the regulatory, legal framework. Large funds are well entrenched in the dealmaking ecosystem to source the assets, navigate through cultural differences, negotiate in a much tighter manner, rope in the right talent and open up growth avenues in the domestic market. Albeit these kinds of partnerships will require well thought through frameworks for unlocking synergies between the acquirer & the target and exit mechanism for the fund. Synergies between the acquirer and target are usually the key to creating alpha returns for the buyout fund and thus, the driver for an interest of a buyout fund for entering into such a partnership.

To summarise, global companies would want to adopt a more focused approach toward India. The availability of assets is not a challenge in India, but success will depend on devising the correct acquisition approach. In most sectors, acquisitions ranging between USD 40mn to USD 200mn would be more appropriate, unless the asset is offered by a large business house or majority controlled by a financial sponsor. Putting efforts into understanding the landscape and global teams doing no-deal visits to India to understand the market have to be a part of their acquisition SOP for India. Having said that, building a long-term relationship with local transaction advisors and using them across transactions shall be given equal importance for making the correct start.

Guest Column
Aparna Khurana
Managing Director
Azelis, India

M&A – A thriving inorganic growth strategy

India is strategically located in South Asia, and has a large, well-educated and tech-savvy workforce, along with good access to ports and supply chain pathways, supporting the development of business and trade across industries.

Leveraging these critical dimensions, Azelis has focused on ensuring the growth of its business in India over the past few years, with strategic acquisitions, key mandate wins, investing in state-of-the-art labs and investing in its team, including the creation of Safety, Health, Environment and Quality (SHEQ) and IT shared services hubs.

The chemical distribution industry in India is very fragmented, with many small players, and is ripe with opportunities for consolidation. Before starting an M&A process, especially for global MNCs, it is key to have good understanding of any future synergies with the target acquisition, to ensure a sustainable and successful future integration of the company into the acquirer’s existing systems and operating models. Therefore, it is important to have a strong dedicated team for M&A, along with other functions such as Legal, Finance, IT, Business Development, HR, SHEQ and Communications that are hands-on and actively involved in the acquisition post-merger integration process. Channeling local teams for their expertise with regards to local customs and practices, to ensure it is a viable acquisition both business-wise and culture-wise, is very important in India, where networking and relationships are key to understanding both the industry landscape as well as potential targets.

As a business actively adopting an inorganic growth strategy in India, we actively search for the right acquisition candidate across three criteria: geography, market segment, and shared corporate values. We look for companies who can bring additional value through technical expertise, formulation and application development, but beyond the commercial fit, we strive to ensure we deal with people with the same passion for innovation, sustainability, and digitalisation.

Understanding the Indian market landscape, including local customs, ways of doing business, and laws and regulations, is critical. Ensuring there is enough dedicated support, from local and corporate teams, to guarantee the deal will be successful, is also a key enabler for a successful transaction. It is thus paramount to carefully study the local market to understand regulation, taxation and business practices, and ensure familiarity with all legal and compliance aspects of operating and doing business in India.

A full integration process should be planned and activated from the start, ensuring that post the acquisition, there is a clear plan for the people and the business. It is important to ensure an M&A process is harmonious right from sourcing to integration, and set up a dedicated team to ensure a successful end-to-end M&A plan and process, to emphasise how critical the post-merger integration process is for successful integration. An approach like this is set to succeed in integrating companies effectively, finding synergies and creating a stronger combined company together.

With this approach, we have successfully integrated many acquired companies over the last few years and are very proud that they are now part of the Azelis family, and fully feel part of it.

Expert Reel

India has been increasingly gaining popularity as a preferred investment destination and is positioned to be a driver of global growth. Watch CNBC-TV18's Shereen Bhan speak with the team from McKinsey & Company at the World Economic Forum in Davos as they discuss India's key growth drivers and the country's presence at Davos 2022.


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