Who wins from a weaker rupee?

Hello,

Happy 2026 and I hope you had a moment to relax over the past few weeks. M&A activity did not look sleepy nor break for a holiday, I must say, and here we are.

India’s Coforge went nearshore with a $2.35bn acquisition of Encora, the single largest transformational outbound deal in India. It signals that IT service companies in the country are trying to reshape global delivery models, with implications for valuation benchmarks, integration risk, and further consolidation in tech services.

Also, IDBI’s sale seems like it will be delayed as buyers test investor appetite for bank balance sheets, governance reform, and sovereign divestment credibility.

Meanwhile, PE funds are seemingly doubling down on Avanse Financial, a Mumbai education loans firm, a space that late-stage PE has been eyeing for a while.

And finally, Bharti Enterprises and Warburg have jointly invested in Haier India, a partnership combining conglomerate and global PE, speaking to India’s promising manufacturing and domestic consumption thesis.

I hope you enjoy this week’s roundup – please connect on LinkedIn to discuss how Ideals VDR can help with your next M&A deal.

Let’s dive in.

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Market Trends

And the rupee came tumbling after

As we wound down for the winter festivities in early December, the rupee did something it had never done before, breaching the 90-against-the-dollar mark, widely described as both a ‘technical’ and ‘psychological’ barrier. 

Central bankers, however, appeared unfazed. Business Standard reported India’s Chief Economic Advisor Anantha Nageswaran saying: “It will come back next year. Right now, it’s not hurting our exports or inflation. I am not losing sleep over it. If it has to depreciate, now probably is the right time.”

That calm contrasts with investor behaviour. Valentis Advisors’ Jyotivardhan Jaipuria expects 2026 to be a better year for flows, noting that global investors are now significantly underweight in India after nearly 15 months of sustained selling.

Asset managers have been heavy net sellers since October 2024, weighed down by declining corporate profitability, stretched valuations, and lingering uncertainty around US-India trade negotiations.

What next for dealmaking?

INR depreciated roughly 5% over 773 trading days. Volatility rose, even as macro fundamentals: growth, inflation control and reserves, were stable.

For M&A, the implications are immediate. Currency weakness resets entry valuations for foreign buyers, complicates exits for PE funds, and increases pressure on deal structuring, hedging strategies and control premiums. India may be cheaper in dollar terms, but riskier to underwrite.

FX volatility feeds directly into IRRs, particularly for PEs operating against dollar return hurdles. As a result, valuation discussions are increasingly framed around downside protection.

Who wins from a weaker rupee? 

Export-linked global platforms, notably IT services, manufacturing and specialty chemicals stand to benefit, as do offshore acquirers with dollar revenues.

For these buyers, rupee weakness improves IRRs on entry, especially in control deals where operating cash flows are INR-denominated but growth, customers or exit pathways are global. USD-denominated PE funds can justify higher rupee valuations while still meeting dollar return thresholds.

This helps explain the renewed emphasis on platform add-ons, bolt-ons and ‘double-down’ transactions, rather than first-time market entries. Capital is being concentrated behind assets that already have scale, resilience and currency hedges built into their business models.

Who feels the pain?  

Financial exits, particularly IPOs, face headwinds as FX volatility feeds into valuation discounts and foreign investor risk aversion. Secondary transactions, too, are increasingly pricing currency risk explicitly, pushing bid-ask spreads wider.

India’s family-owned and promoter-led businesses remain resistant to FX-adjusted valuations, often viewing currency-driven discounts as temporary or unfair. This is likely to make inbound M&A negotiations tougher, particularly where sellers anchor pricing to historical peak multiples.

Term sheets are already reflecting the shift. FX hedging costs are being embedded into valuation models, earn-outs and downside protection structures, nudging the market toward more conservative risk allocation as expectations tilt toward gradual rupee weakness rather than appreciation.

Optimism – waiting for things to change – is rarely an effective business strategy. India remains structurally attractive but the next phase of dealmaking will be about fundamentals: cash flows, export competitiveness and global relevance across IT, pharma and manufacturing.