Indians eyeing offshore firms to gain access: JM Financial MD & CEO

Healthcare, pharma, tech to drive M&As in coming quarters

Indian companies acquiring offshore firms are primarily seeking to gain “access” to specific markets or acquire essential technologies and intellectual property to enhance their competitiveness, according to Sonia Dasgupta, MD & CEO of Investment Banking of JM Financial.

There is a rising interest in outbound investments, with Indian firms actively pursuing acquisitions at favourable valuations, Dasgupta said in an exclusive interview.

The Indian mergers and acquisitions (M&A) market is expected to continue its upward trajectory, driven by macroeconomic factors, stronger corporate balance sheets, substantial private equity funds, and a favourable regulatory environment, Dasgupta said.

India’s vibrant capital markets have also played a crucial role in sustaining M&A activity, as equity financing for acquisitions is more accessible during bull markets, she said.

After a decline last year, mergers and acquisitions in India rose by 13.8 per cent, totaling $69.2 billion in the first nine months of 2024, compared to $60.8 billion in the same period in 2023. Bharti Airtel’s acquisition of a stake in BT Group for $4.08 billion topped the M&A transactions this year so far. This trend is expected to continue with companies looking for small ticket size deals to gain specific markets or technology, she said.

Indian conglomerates are increasingly concentrating on their core operations, which is leading to more asset sales and quicker exits. “To keep pace with India’s growth momentum, companies must embrace digital technologies to boost efficiencies, invest in R&D, prioritise talent acquisition and development, and form strategic partnerships to remain competitive. They should also anticipate changes in the total addressable market (TAM) and decide whether to develop talent, technology, or capital internally or pursue inorganic acquisitions,” she said.

Dasgupta emphasised that India's M&A appetite remains robust despite global economic uncertainties. Investors are actively seeking growth opportunities, drawn by India's large consumer base, favourable demographics, and government initiatives. “The need for private equity investors to exit their holdings, coupled with generational shifts that prompt family settlements or changes in interests, fuels deal momentum,” she added.

Dasgupta said the focus on a digital economy and sustainability is expected to drive M&A in technology and renewable energy sectors. Additionally, there will be strong deal flows in healthcare, pharmaceuticals, industrials, new-age tech, and financial services.

M&A valuations often reflect a long-term perspective, with various factors like synergies and control premiums influencing the pricing. While listed company valuations impact sellers’ expectations and buyers’ capacities, deals tend to close based on long-term sustainable multiples rather than short-term market fluctuations, she said. “To mitigate market volatility, buyers increasingly utilise earn-outs and contingent payments to manage risk and align incentives with long-term performance. We employ a rigorous, data-driven approach to set realistic valuation expectations for our clients while ensuring optimal outcomes,” Dasgupta said.