What does drop in FDI mean for Indian M&A?

Hello,

Here’s what’s new in Indian M&A this week.

UK-headquartered legal firm CMS has formalised its India ambitions by partnering with domestic deal lawyers, IndusLaw. The move may mean expectation for greater deal flow, innovative commercial structures, and growing post-globalisation regulatory complexity. Indian policymakers take note: the ease of doing business may become a global differentiator.

In new asset classes and regulatory shifts: HK-based TPG NewQuest says continuation vehicles, once a workaround, are now critical to capital raising; markets regulator SEBI tweaked what qualified as Category II AIFs, impacting credit and hybrid vehicles. 

But Finance Minister Nirmala Sitharaman pushed for faster clearances while former FM Chidambaram, flagged an alarming rise in cancelled domestic investments i.e. a rise in approved investments that are later shelved or abandoned before execution.

And a quiet goodbye to Shanti Ekambaram, one of the last high-profile women leaders in Indian banking retiring from Kotak. 

Hope you enjoy this week’s roundup. Do connect with me on LinkedIn to find out how I may help with your next M&A deal.

Deal Tracker

Our weekly roundup of all the confirmed M&A deals in India.

Market Trends

What funding crunch?

The foreign investment flip is real, but so is India’s local resilience

At first glance, India’s foreign investment data paints a picture of drought. RBI numbers show net FDI inflows collapsed by 96.5% in CY25 ($0.49 billion), a headline-grabbing stat that dominated press coverage last week. The collapse, driven by record repatriation and outbound investments,  sparked talk of investor exodus but events told a nuanced story.

^^^Net FDI into India turned negative in early 2025 as repatriation and outward investments overtook gross inflows for the first time in a decade.^^^

Source: RBI

The dealmaking hasn’t stopped. Strategic capital is bending over backwards for India-facing assets, while Indian firms make bold outbound bets. 

India’s largest auto parts maker Motherson Group is reportedly bidding for Pirelli, the troubled Italian-Japanese supplier to Nissan and Franco-Italian-American automaker Stellantis. If successful, the deal would mark an audacious reverse acquisition that might position the buyer in the top tier of global component makers. While Motherson has faced margin pressure, management appears to be banking on a familiar turnaround logic: two underperformers may outperform when brought together, not unlike domestic conglomerate JSW’s acquisition of Ispat back in 2012.

Also, Mumbai-based digital business services provider Altimetrik is nearing a $614 million acquisition of SLK Software, an AI solutions business. 

Meanwhile, JSW Paints, a unit of local conglomerate OP Jindal Group, is scooping up AkzoNobel India’s stake for $1.1 billion: inbound play wrapped in compliance with new Minimum Public Shareholding (MPS) norms which require at least 25% public float in listed firms. This will lead to many family-owned businesses toward greater institutional discipline.

Rakesh Gangwal’s family trust offloaded a 5.72% stake in low-cost airline IndiGo, unlocking ₹11,564 crore ($1.39 billion) , correcting  earlier reports that cited a sale of 3.4% and ₹11,988 crore ($1.44 billion). Gangwal, an Indian-born US citizen, has hinted at more strategic divestments in the pipeline.

Other telling signs of maturity: The National Stock Exchange just paid a record $118 million to settle with SEBI, paving the way for a long-delayed IPO; and a British American Tobacco $1.36 billion-block deal in Indian consumer goods firm ITC is imminent. They claim there are plans for further stake reduction. 

In private credit and structured debt fundraising, India continues to outperform: Multiples PE closed a $430 million continuation fund, bucking the broader pullback.

Also Quadria Capital, a healthcare-focussed PE firm with a strong India-Asia footprint, secured $1.07 billion for its third vehicle; and debutant Enko Capital, is receiving LP commitments for its first private credit fund. 

Globally, the contrast is stark. According to Bloomberg and S&P, 2024–25 marks the sharpest drop in deals in a decade (see chart below), with fewer funds returning capital to LPs and exits becoming rarer, too. 

^^After peaking in 2021, PE fundraising volumes and the number of funds globally are both on a downward trend, with a sharp fall in 2024.^^^

Source: S&P Global

While global funds pull back, India is pivoting from control-focused PE to credit and hybrid structures– a response to liquidity mismatches and glacial resolutions under India’s 2016 Insolvency and Bankruptcy Code (IBC). 

The country diverges again compared to its next-door rival China, still buoyed by state-led capital and cloistered access while India’s pitch rests on private initiative, domestic consumption, and openness to global LPs.

Source: S&P Global Market Intelligence (excludes terminated deals, add-on acquisitions and debt funding rounds; only funds HQ’d in China or India).

Policymakers, including central bank RBI, have framed the declining inflows as an inevitable sign of a maturing market, a correction, rather than a cause for alarm.

Deals lawyer, Zia Mody, founding partner at Indian legal firm AZB & Partners, too, remarked that it’s creative deal structures that are keeping Indian M&A upbeat.  

That said, some of this churn could be disguised round tripping, where capital leaves only to re-enter via more favourable channels. Mauritius, Singapore, and the Netherlands have consistently ranked among the top sources of FDI inflows thanks to tax treaties and secrecy laws. As the IMF once described it, some of this may be ‘phantom FDI.’ 

But from NSE’s regulatory clearance, to regulators greenlighting Myntra and Groww, Investcorp’s 4x return from selling fashion retailer Citykart to A91 and NewQuest, and a $65 million Series B that valued the shop at $169 million; there’s little reason to fear the capital crunch is near. Or at least, not the kind that dims animal spirits.