India’s healthcare sector presents opportunities for inbound M&A and FDI

India presents a myriad of opportunities for inbound mergers and acquisitions (M&A), and foreign direct investment (FDI) as one of the fastest-growing economies in the world. The country’s robust economic growth, burgeoning middle class, and strategic position as a technology and innovation hub has made it an attractive destination for foreign investors.

In recent years, India has seen a significant uptick in FDI across various sectors, driven by favorable demographics, government reforms, and an increasingly liberalized economy. With the pre-election Indian government widely announcing its core objective to obtain around USD 100 billion of annual foreign investment over the next few years, the key questions are:

1. How can businesses ride on this trend as the uptick continues?
2. What are the key sectors — and up and coming sectors — for inbound deal-making activity in India?

India deal-making outlook
While much of the world’s deal-making activity dropped significantly in 2023 after the boom year of 2022, Indian M&A and FDI activity experienced only moderate slow-down. From 2022 to 2023, M&A deal volume fell by 15%, and M&A deal value reduced by 4% (excluding the outlier 2022 HDFC and 2023 Jio mega-deals). Additionally, in line with global market movements, the higher cost of capital impacted activity by private equity (PE) and venture capital (VC) investors, with India’s combined PE and VC deal value falling by 35%.

Yet, despite these headwinds, 2023 set the scene for emerging trends for 2024:

• Mid-market and smaller strategic deals: Mid-market acquirers (up to USD1 billion in revenue) comprised nearly 50% of India’s M&A activity, and mid-market deals (with a value of USD100 million to USD1 billion) increased from 20% to 35% from 2022 to 2023.
• Inbound M&A: Inbound M&A as a share of overall M&A activity in India increased significantly from 27% in 2022 to 41% in 2023, led by US and European strategic investment interest particularly in the financial services, technology and manufacturing sectors.

Healthcare and pharmaceuticals
The healthcare sector in India is also attracting inbound M&A, fuelled by India’s large population and growing middle class, rising healthcare needs, and growing medical tourism industry.

Recent notable deals include:

• In Q3 2023, Advent International completed its acquisition of a majority interest in Hyderabad-based contract development and manufacturing organization, Suven Pharmaceuticals Ltd.
• In Q4 2023, Blackstone acquired a circa. 75% stake in Care Hospitals from TPG with a USD 1 billion investment.
• Mubadala acquired a minority interest in Manipal Health Enterprises in Q1 2024, to support the expansion of healthcare services across India.
• In May 2024, KKR entered into binding agreements to acquire a majority interest in the Karnataka-headquartered medical devices producer Healthium Medtech from Apax Partners.

Baker McKenzie