Outbound M&A by Indian firms to rise on back of strong balance sheets: Citi

India's investment banking sector is set for a rise in outbound mergers and acquisitions (M&A), driven by strong balance sheets and capital availability among Indian companies, according to top Citibank India officials.

 

Sectors such as technology, pharmaceuticals, and chemicals are expected to lead this wave of global expansion as local firms look to leverage their financial strength to pursue acquisitions abroad.

 

“From next year onwards, we expect this wave to gain momentum, with Indian companies looking to go overseas and acquire assets. Balance sheets have been de-levered, valuations are strong, and there is ample capital available for them, both publicly and privately,” said Rahul Saraf, head of investment banking at Citi India, during an online media interaction. “At the same time, there are great opportunities available globally, and all of these factors together will likely drive much more activity from India compared to the past.”

 

The last two years have been transformative for investment banking in India, not just in terms of the volume of activity, but also the quality of deals and their impact on businesses and the economy, according to Saraf. Increasing involvement from both large and small companies, private equity, and multinational firms in India's capital markets indicates a positive outlook for the coming years, he added.

 

Saraf noted a diversification in transaction types, with a surge in activity across capital markets, M&A, and structured debt. “We feel fantastic about where things stand today and where they are likely to be in the coming decades,” he said.

 

Arvind Vashistha, India head of equity capital markets (ECM) at Citi, echoed the optimism, noting that the capital markets pipeline is robust and that this year has turned out to be the “biggest year for the Indian capital market.” He pointed to the breadth of issuers, ranging from Indian companies to financial sponsors, and the growing size of transactions as key trends.

 

On the equity capital market side, Vashistha highlighted the strong participation of both foreign institutional investors and domestic institutional investors.

 

“Today, we are the fourth-largest capital market, growing steadily. Quarter-on-quarter earnings growth has given a lot of confidence to both the market and investors,” said Vashistha. “This fundamental driver, in turn, feeds into investors seeking more paper, especially as the secondary market remains stable.”

 

When asked about the initial public offering (IPO) boom in India, Vashistha attributed it to a combination of economic growth, controlled inflation, and investor confidence. He noted that foreign institutional investors have been enthusiastic participants, while domestic investors have also played a leading role.