M&A Hotline: Deal-Making Landscape in India in 2026: Trends, Developments and Considerations

Deal-Making Landscape in India in 2026: Trends, Developments and Considerations

INTRODUCTION

Global deal-making in 2025 demonstrated resilience and, by several metrics, surpassed prior years’ activity despite macroeconomic and geopolitical uncertainties. Total global mergers and acquisitions (“M&A”) value for the first nine months of 2025 rose approximately 10% year-on-year¹, extending a recovery trajectory from 2024 even against a backdrop of tariff shifts and geopolitical tensions. Major markets, particularly North America, accounted for a significant share of activity, while private equity sponsors and corporate acquirers increasingly pursued large-cap, strategic transactions.

India’s M&A landscape also remained robust in 2025, with sustained deal volumes and expanding value driven by both domestic and cross-border transactions. Deal value in India rose 37% year-on-year to about USD 26 billion across 649 transactions in the first nine months of 2025², underscoring continued investor interest despite global volatility. Foreign direct investment flows into India likewise remained strong, with total FDI inflows reaching approximately USD 81.04 billion in FY 2024-25³, reflecting sustained confidence in India’s economic prospects.

In this context of resilient deal-making amid shifting global and domestic conditions, we have set out certain legal, political and regulatory developments to identify key trends likely to shape transaction structuring, negotiation and documentation in India in 2026.

Below are the themes expected to form the cornerstone of deal-making in the year ahead:

1. Global Geopolitical Developments: Tariffs, Fragmentation and Strategic Realignment

Deal-making in 2026 is expected to continue to be shaped by geopolitical uncertainty, including renewed protectionist policies, tariff regimes, and geopolitical tensions across key economic corridors. Developments in the United States, including imposition of higher tariffs on India, shifts in trade policy and industrial strategy, alongside ongoing conflicts and geo-economic fragmentation, are likely to influence capital allocation decisions, supply chain realignments and cross-border investment appetite. As global investors reassess risk exposure across jurisdictions, India is increasingly being positioned as a relative safe harbour, particularly for long-term strategic and manufacturing-led investments.

On the contrary, there is a renewed momentum around the proposed EU–India Free Trade Agreement (“FTA”), in light of the recent conclusion of negotiations.⁴ The finalisation of the FTA is expected to further enhance India’s attractiveness as a manufacturing and export hub for European businesses, by improving market access, reducing tariff and non-tariff barriers, and providing greater regulatory predictability in the European Union.

Accordingly, acquirers are likely to prioritise Indian assets that enhance supply chain resilience, reduce dependence on concentrated geographies and align with broader geopolitical trends, which will increase M&A and private equity investments alike.

2. Continuity, stability and improved global positioning of the Indian and South Asian political landscapes

India’s domestic political environment continues to be characterised by relative stability following the consolidation of the Modi 3.0 government. This continuity is expected to reinforce policy predictability, administrative momentum and investor confidence, particularly in sectors aligned with the government’s long-term economic and industrial priorities. India’s growing engagement with multilateral groupings, including BRICS, and its calibrated approach to global diplomacy further enhance its positioning as a strategic investment destination amid global volatility.

From a deal-making perspective, political stability is expected to support sustained inbound investment, particularly in infrastructure, manufacturing, financial services and technology-driven sectors. In 2026, investors are likely to factor political continuity into longer-term valuation models, exit planning and capital deployment strategies, reinforcing India’s attractiveness for both strategic and financial investors.

3. De-globalisation and India’s emergence as a self-sufficient hub

Particularly in light of major changes to the USA’s electoral climate with the election of President Donald Trump and his “MAGA” strategy for USA, there is now a shift towards de-globalisation and economic fragmentation. As mentioned above, given that multinational corporations are now reassessing exposure to jurisdictions marked by heightened geopolitical risk, regulatory unpredictability or supply chain concentration, particularly the United States and China, India is increasingly being viewed as a comparatively stable, self-sufficient and scalable market.⁵ India’s large domestic consumption base, diversified industrial ecosystem and improving infrastructure have reduced reliance on external markets, allowing businesses to operate with greater resilience in a fragmented global environment.

From an M&A perspective, this shift is likely to translate into increased deal activity within India, as investors seek to reallocate capital towards jurisdictions that offer long-term stability and internal demand-driven growth. Rather than merely serving as an alternative manufacturing base, India is increasingly positioned as a standalone growth market, supporting both strategic acquisitions and platform investments across sectors. In 2026, de-globalisation is therefore expected to act as a net positive for Indian deal-making, driving consolidation, capacity expansion and long-term capital deployment as global players pivot towards more stable and self-sustaining economies. Indian corporates, in turn, are now also using outbound M&A more strategically to secure raw materials, energy assets, and downstream market access.

4. Larger value deals and increasing control transactions

Deal-making has now witnessed a clear recent trend towards larger-value transactions, a pattern that is expected to intensify in 2026. Strategic acquisitions by global corporates, as well as increased participation by financial sponsors in control deals, reflect growing confidence in the Indian market’s depth and scalability. High-profile transactions involving global financial institutions and industrial players (such as SMBC’s recent acquisition of shareholding in Yes Bank for approximately USD 1.78 billion⁶, MUFG’s acquisition of shareholding in Shriram Finance for approximately USD 4.4 billion⁷, Emirates NBD’s acquisition of shareholding in RBL Bank for approximately USD 3 billion⁸) underscore the willingness of sophisticated acquirers to deploy significant capital in pursuit of long-term growth and market leadership.

For private equity investors, this environment has translated into a greater appetite for control and co-control transactions, driven by the need for operational influence, governance rights, and exit certainty. In 2026, deal documentation is therefore likely to reflect more robust control mechanics (including board representation, robust veto rights and deadlock provisions), enhanced governance frameworks and detailed exit provisions, particularly in large-cap and platform acquisitions.

5. Research, Development and Innovation Scheme: Catalysing India’s innovation-led deal ecosystem⁹

In July 2025, the Indian Cabinet approved a landmark Rs. 1 lakh crore (approx. USD 11.5 billion) Research, Development and Innovation (“RDI”) scheme aimed at catalysing private-sector R&D and strengthening India’s capabilities in strategic and sunrise technologies. Operationalised in November 2025 under the Anusandhan National Research Foundation (“ANRF”), the scheme is structured as a Special Purpose Fund and seeks to provide long-term, patient capital to innovation-led enterprises. The RDI scheme aligns closely with India’s Atmanirbhar Bharat and Make in India objectives by encouraging domestic development, ownership and commercialisation of advanced technologies across sectors.

The RDI scheme adopts a flexible financing framework, offering low or nil-interest long-tenure loans, equity or equity-linked instruments, and contributions to deep-tech-focused fund-of-funds. Funding support may extend up to 50% of the project cost for eligible projects with Technology Readiness Levels (“TRL”) of 4 and above. Implementation guidelines¹⁰ released in 2025 envisage deployment through registered intermediaries such as Alternative Investment Funds (“AIFs”), Development Finance Institutions (“DFIs”) and Non-Banking Financial Companies (“NBFCs”). Eligibility is restricted to companies that are Indian-controlled, headquartered in India and hold intellectual property domestically, with the scheme prioritising sectors such as Artificial Intelligence (“AI”), Biotechnology and Biomanufacturing, Climate and Energy transition technologies, Advanced Materials, Digital Infrastructure and Deep-Tech Manufacturing.

The RDI scheme is expected to act as a structural tailwind for innovation-led M&A and private equity activity in 2026. By de-risking R&D-intensive businesses and improving capital efficiency, the scheme is likely to accelerate scale-ups, support higher valuations and deepen the pipeline of investible technology assets. Investors may increasingly structure transactions to preserve Indian control and IP localisation to ensure RDI eligibility, while strategic acquirers may view RDI-backed companies as more attractive targets due to embedded government support and stronger technology moats. Overall, the scheme is expected to sustain deal momentum and drive strategic consolidation across India’s innovation ecosystem in 2026.

6. Regulatory Shifts in Insurance and Gaming sectors: Implications for Deal-Making

In 2026, regulatory developments across the insurance and gaming sectors are expected to materially reshape investment conditions and deal-making dynamics in India.

• Insurance: In 2025, the Government raised the Foreign Direct Investment (“FDI”) cap in the insurance sector from 74% to 100% under the automatic route through the Insurance Laws (Amendment) Bill, 2025¹¹, subject to conditions such as mandatory reinvestment of premium income in India. This move follows the Ministry of Finance’s earlier proposal to liberalise foreign ownership norms in the insurance sector, as covered in our previous article here. The enhanced FDI regime in insurance is expected to ease capital constraints and enable foreign insurers to acquire full ownership of Indian joint ventures. From a deal-making perspective, it is likely to accelerate consolidation, facilitate buyouts of Indian partners and drive increased cross-border transactions, particularly as global insurers seek greater control and operational flexibility in India.
• Gaming: The Promotion and Regulation of Online Gaming Act, 2025¹² has instituted a prohibition on “online money games” involving wagering, while permitting e-sports and non-wagering casual games. The legislation draws a statutory distinction between real-money gaming and other online formats, with platforms offering wagering-based games exposed to penal consequences. Following the enactment of the law, several real-money gaming platforms, including Dream11, suspended paid contests and commenced restructuring of their business models, including shifts towards advertising-led and subscription-based offerings¹³. Going forward, the revised regulatory framework makes investment in this sector a reduced possibility, with investors likely to reassess regulatory risk and long-term viability of wagering-based platforms given potential regulatory uncertainty.

7. Evolving Regulatory Frameworks: Data Protection and Labour Codes

The operationalisation of data protection and labour law reforms continues to reflect a move towards much awaited consolidated and principles-based regulatory frameworks.

• Data Protection Law: The Government notified the Digital Personal Data Protection Rules, 2025¹⁴, on 14 November 2025, giving full effect to the Digital Personal Data Protection Act, 2023 (DPDP Act) and establishing a rights-based, consent-driven framework for digital personal data governance. The rules operationalise obligations on data fiduciaries and processors, including clear consent protocols, breach notification requirements and phased compliance timelines, and embed principles such as purpose limitation, data minimisation, security safeguards and accountability into the domestic data ecosystem. Together with the DPDP Act, the rules replace the prior patchwork regime under the Information Technology Act (IT Act) and create a privacy-centric regime that applies to both domestic and foreign entities processing digital personal data in India, with consequences for data handling practices and contractual diligence in M&A transactions.
• Labour Codes: Effective 21 November 2025, the Government implemented the four consolidated Labour Codes, namely, (i) the Code on Wages, 2019, (ii) the Industrial Relations Code, 2020, (iii) the Code on Social Security, 2020, and (iv) the Occupational Safety, Health and Working Conditions Code, 2020¹⁵. These 4 Codes have replaced 29 earlier labour laws with a unified legislative framework. The reform aimed at modernising and simplifying labour regulation, harmonising wage rules, social security coverage (including for gig and platform workers), industrial relations, and workplace safety, while streamlining compliance processes for employers and facilitating a single-window regime for registrations and returns. A detailed analysis of the Codes can be found here. The uniform Codes are expected to impact workforce management practices, employment contracts and labour diligence in transaction contexts.

8. Tax Considerations

While deals are often structured to endure in perpetuity, they remain subject to one of life’s two certainties, taxation. As India approaches 2026, a series of domestic reforms and international tax realignments are converging to alter not merely the tax cost of mergers and acquisitions, but the manner in which such transactions are conceived, structured, and negotiated. The emerging framework places greater emphasis on economic substance, narrative defensibility, and global consistency.

• Income Tax Act, 2025 

  The Income-tax Act, 2025 (“New ITA”), effective from 1 April 2026, is not expected to change the headline tax cost of M&A transactions, as it expressly preserves existing taxation principles while modernising and simplifying the statutory framework. Capital gains on share and asset transfers and the availability of tax-neutral amalgamations and demergers continue broadly on the same substantive footing. For deal structuring, this means that the core choice between share deals, asset deals, and reorganisation-led structures remains intact, with no immediate need to re-engineer standard transaction models purely from a tax cost perspective.

  The more practical impact for 2026 M&A lies in improved certainty and cleaner execution mechanics. The introduction of a unified “Tax Year”, replacing the dual concepts of Assessment Year and Previous Year, is intended to reduce long-standing confusion around timing and is likely to simplify the tax analysis for deferred closings, escrows, earn-outs, and post-closing adjustments. In parallel, the consolidation and clearer drafting of existing provisions (without substantive change) is expected to reduce reliance on aggressive technical positions, leading to more conservative pricing of tax attributes, tighter diligence around historical exposures, and transaction documentation that is anchored to a clearer and more predictable statutory framework.

• Permanent Establishments

  Permanent establishment (“PE”) exposure is a key area where developments in 2025 are expected to materially influence M&A execution in 2026. In Hyatt International Southwest Asia Ltd.¹⁶, the Supreme Court reaffirmed that the existence of a PE must be determined based on the functional and economic reality of activities carried out in India, rather than on formal contractual or organisational arrangements alone. A detailed analysis of the judgement can be found here. The Court’s emphasis on substance and on-ground conduct has particular relevance for cross-border transactions, where post-closing integration often involves management oversight, secondments, and transitional service arrangements.

  In 2026, PE risk is therefore unlikely to be confined to steady-state operating models, instead it may arise during the execution and integration phase of a transaction itself. This is expected to influence how acquirers structure integration timelines, deploy personnel and draft transitional arrangements, with identified PE risk increasingly feeding into purchase price negotiations, indemnities and deal execution mechanics.

• Multilateral Instrument

  Developments relating to the Multilateral Instrument (“MLI”) in 2025 further reinforce the shift towards substance-based outcomes in cross-border M&A. Tribunal rulings during 2025 in Sky High Appeal XLIII Leasing Company Ltd.¹⁷ and Kosi Aviation Leasing Ltd.¹⁸ examined whether the Principal Purpose Test (“PPT”) introduced through the MLI could be applied in the absence of express domestic notification under section 90 of the ITA. While these decisions cautioned against the automatic application of MLI provisions to tax treaties without appropriate notification, they simultaneously affirmed the tax authorities’ ability to scrutinise treaty claims through fact-intensive examination of commercial intent and economic substance under domestic anti-abuse principles.

  For deal-making in 2026, this jurisprudence reframes how treaty entitlement is assessed and negotiated. Treaty protection is no longer evaluated solely by reference to the legal structure or residence of the seller at the time of exit, but increasingly in light of the commercial rationale for the investment, the manner in which investment and exit decisions were taken, the conduct of the parties over the life of the investment, and the structuring and sequencing of the exit transaction. As a result, transaction parties are likely to adopt more calibrated approaches to withholding, representations and escrow arrangements, and to reflect treaty-related considerations more explicitly in pricing and transaction documentation where treaty entitlement depends on these factual and transactional elements.

• Tiger Global International II Holdings: Implications for Treaty Structuring and M&A

  In Tiger Global International II Holdings,¹⁹ the Supreme Court held that a Tax Residency Certificate (“TRC”) was not conclusive proof of treaty entitlement under the India–Mauritius Double Taxation Avoidance Agreement (“Mauritius Treaty”), and that tax authorities may examine surrounding facts, including effective control and decision-making, to assess whether treaty benefits should be available. The Court held that the grandfathering protection from General Anti-Avoidance Rules (“GAAR”) under CBDT Circular No. 7 of 2017²⁰ did not apply to pre-2017 investments which were sold after 2017, if found to be impermissible avoidance arrangements.

  On the treaty analysis, the Court stated that Article 13(4) of the Mauritius Treaty (the residuary clause under Capital Gains) did not extend to indirect transfers effected through the sale of shares of an offshore holding company. Accordingly, the sale of shares of Flipkart Singapore (which derived substantial value from Flipkart India) was not protected by Article 13(4), and treaty benefits were denied.

  The ruling marks a shift from India’s previous treaty jurisprudence with the following consequences. Firstly, for pre-2017 investments, TRCs are no longer a safe harbour. Secondly, GAAR risk now sits squarely in deal execution for legacy structures. Buyers are likely to price treaty uncertainty into transactions, demand stronger representations on historic governance and substance, and seek escrows or indemnities for post-closing tax exposure. Thirdly, pre-2017 structures are no longer insulated from GAAR merely by age, thereby accelerating pre-exit restructurings. Fourthly, fund-led structures may face heightened scrutiny, pushing sponsors to realign governance models. Finally, deal mechanics and documentation will evolve. Buyers may adopt more conservative withholding positions and negotiate bespoke tax allocation clauses addressing GAAR exposure and treaty denial risk. In practical terms, treaty relief in India-linked private equity / M&A transactions is no longer a background assumption, but a negotiated commercial variable.

• Pillar Two

  Pillar Two is part of the OECD’s BEPS 2.0 project and is designed to ensure that large multinational groups pay a minimum level of tax globally. Broadly, it requires multinational enterprise (“MNE”) groups with consolidated annual revenues of at least EUR 750 million to pay tax at an effective rate of at least 15% in each country in which they operate. To achieve this, Pillar Two works by looking at tax outcomes country by country, rather than entity by entity. For each jurisdiction, the group’s effective tax rate (“ETR”) is calculated by comparing the tax actually paid in that country with the profits earned there, based largely on consolidated financial statements and subject to certain adjustments. If the effective tax rate in any jurisdiction falls below 15%, the difference is treated as a “top-up tax” that must be paid to bring the overall tax burden up to the minimum level.

  Importantly, Pillar Two is designed so that someone will collect this top-up tax, even if the low-tax country does not. This is achieved through three coordinated mechanisms. First, a country may choose to impose a Qualified Domestic Minimum Top-up Tax (“QDMTT”), allowing it to collect the additional tax itself and retain the revenue locally. If it does not do so, the top-up tax may instead be collected by the jurisdiction of the group’s parent entity under the Income Inclusion Rule (“IIR”), which effectively taxes the parent on its share of the low-taxed profits. If neither of these applies, other countries in which the group operates can collect the shortfall under the Undertaxed Profits Rule (“UTPR”), typically by denying deductions or making equivalent adjustments. In practical terms, this means that low taxation in one country can result in higher taxation in another, shifting taxing rights away from the low-tax jurisdiction.

  Although Pillar Two has not yet been implemented as a domestic tax in India, developments in 2025 brought the regime firmly into the mainstream of deal analysis. Multinational groups began factoring Pillar Two impacts into financial reporting and internal tax modelling, and the Ministry of Corporate Affairs (“MCA”) amended Ind AS 12 (Income Taxes)²¹ in 2025 to introduce specific Pillar Two related disclosures, including (i) an exception from recognising deferred tax assets or liabilities arising from Pillar Two income taxes and (ii) mandatory qualitative and quantitative disclosures of an entity’s exposure to Pillar Two where legislation has been enacted or substantively enacted. In parallel, the Institute of Chartered Accountants of India (“ICAI”) issued amendments to AS 22 (Accounting for Taxes on Income)²², providing an exemption for non-company entities from accounting for deferred taxes arising from Pillar Two income taxes.

  At the same time, the rollout of Pillar Two in other jurisdictions demonstrated that tax incentives, holidays and preferential regimes may no longer deliver lasting group-level tax benefits, because any tax saving achieved locally can be offset by top-up taxes imposed elsewhere in the group.

  For deal-making activity in 2026, Pillar Two is therefore expected to affect not just tax compliance, but deal pricing and negotiations. Buyers are increasingly likely to assess targets based on their post-acquisition, group-wide ETR, rather than headline local tax rates. Pillar Two considerations are also expected to feature prominently in due diligence, valuation models and SPA negotiations, particularly around who bears the economic cost of any top-up taxes and how tax incentives and deferred tax positions are reflected in pricing. In this sense, Pillar Two is no longer a technical tax overlay, but a commercial variable that directly influences valuation and risk allocation in cross-border M&A.

9. Funds under SEBI and IFSCA, Gift City

• Accredited Investors

  Under the SEBI AIF Regulations, Accredited Investors (“AIs”) are investors who satisfy prescribed net worth, income or asset-based thresholds and obtain accreditation from a SEBI-recognised accreditation agency or qualify as deemed AIs under the Regulations. Such investors are considered sufficiently sophisticated to assess and bear investment risks, enabling SEBI to permit targeted regulatory and compliance relaxations for AIFs raising capital exclusively from AIs.

  SEBI’s AIF Regulations (Third Amendment) Regulations, 2025²³ introduced AI–only AIFs and granted significant relaxations to Large Value Funds for Accredited Investors (“LVFs”) to deepen domestic participation and reduce compliance friction. Key changes include lowering the minimum investment threshold from INR 70 crore to INR 25 crore, exempting key personnel from national institute of securities market (“NISM”) certification requirements, and removing mandatory pari passu rights obligations. LVFs are also exempt from the standardised placement memorandum template and annual PPM compliance audits, without requiring investor waivers. Additionally, SEBI’s December 8, 2025 circular permits existing AIFs or schemes to convert into AI-only funds, facilitating a smoother transition to the revised regime.

  By concentrating capital in the hands of accredited investors, the AI-only and LVF regime enables materially larger cheque sizes with fewer investor-level constraints, improving funding certainty for M&A transactions. The reduced compliance load and expedited approval mechanics functionally create a faster on-ramp to deployment of investments, allowing sponsors to move decisively in competitive or time-bound transactions. In practice, this shifts deal dynamics in favour of well-capitalised buyers and shortens signing-to-closing cycles.

• Co-Investment

  Co-investment in the AIF context refers to a structure where select investors participate alongside a fund in specific portfolio investments to increase ticket size, manage concentration limits, or tailor exposure to high-conviction deals. Historically in India, this was facilitated primarily through the Portfolio Management Services (“PMS”) route, which sat outside the AIF regulatory perimeter and created fragmentation in governance, higher operational friction and structural complexity. To streamline this, SEBI amended the AIF Regulations²⁴ in September 2025 and introduced a formal framework permitting Category I and Category II AIFs to offer co-investment opportunities to AIs through a co-investment vehicle (“CIV”) scheme housed within the AIF structure. Each CIV scheme is required to be ring-fenced with separate bank and demat accounts, operate on a no-leverage basis, and adhere to a disclosed governance and allocation framework through a shelf placement memorandum. As part of the framework, investor-level exposure through CIV schemes is capped at three times the investor’s contribution to the main AIF’s investment in the same portfolio company, subject to exemptions for sovereigns, development institutions and government-backed entities. The regime also restricts co-investment access for excused or defaulting investors and imposes safeguards to ensure regulatory parity with direct investments, squarely bringing co-investment within SEBI’s supervisory framework.

  Going forward for M&A deals the CIV framework meaningfully expands structuring flexibility and execution certainty for fund-led deals. By enabling co-investment within the AIF regime rather than through a parallel PMS structure, CIV schemes allow sponsors to syndicate larger equity cheques for control acquisitions, take-privates and platform builds without breaching concentration limits at the main fund level. This makes it easier to accommodate anchor limited partners (“LPs”) and strategic co-investors, scale into high-value transactions, and commit capital earlier in competitive auctions. In practical terms, the CIV regime converts co-investment from an operational workaround into a mainstream transaction tool, deepening capital pools and enabling more sophisticated investment structuring in Indian M&A.

• Third-Party Fund Management Framework in GIFT City

  In 2025, the International Financial Services Centres Authority (“IFSCA”) introduced a formal Third-Party Fund Management Services (“TFMS”) framework²⁵ in GIFT IFSC by amending the IFSCA (Fund Management) Regulations, effective July 30, 2025. The framework allows an IFSCA registered Fund Management Entity (“FME”) to host funds managed by third-party fund managers who are regulated in their home jurisdictions, without requiring them to establish a separate onshore fund management platform in India. While the third-party manager undertakes investment and exit decisions, regulatory approvals, supervision and compliance obligations remain with the registered FME, supported by contractual safeguards such as indemnities, risk disclosures and termination rights. This third-party fund manager model aligns GIFT IFSC with global fund hubs, materially lowering entry barriers and making the regime more accessible for overseas sponsors, first-time India-focused managers and smaller or sector-specialist funds that would otherwise find the cost and time burden of a standalone platform prohibitive. A detailed analysis can be found here.

  For M&A deals in 2026, the TFMS framework is likely to compress deal timelines and deepen cross-border capital participation. By removing the need for a full-scale fund management presence, TFMS reduces setup costs, shortens regulatory lead times and enables faster mobilisation of capital for India-linked acquisitions, including control deals, minority investments, sponsor-to-sponsor transactions and platform strategies. The third-party fund manager model also improves counterparty and lender confidence, since regulatory accountability remains anchored with a licensed FME even where investment decisions are outsourced. In practical terms, TFMS strengthens GIFT IFSC’s positioning as a mid-shore hub for fund-led M&A, enabling a broader universe of global sponsors to compete for Indian assets with lower structural friction and greater regulatory clarity.

• Revised Regulatory Framework for Angel Funds

  SEBI’s 2025 amendments²⁶ to the Angel Fund framework under the AIF Regulations restrict participation to Accredited Investors and replace the earlier scheme-based model with direct fund-level investments. The reforms emphasise investee independence, requiring that eligible startups must not be promoted by or affiliated with any industrial group with turnover exceeding INR 300 crore. Angel Funds are now permitted to make follow-on investments in portfolio companies that no longer qualify as startups, subject to conditions prescribed by SEBI. The framework also standardises investment limits, including a minimum investment of INR 10 lakh per investee and a maximum investment of INR 25 crore, a one-year lock-in (with limited relaxations for third-party exits), and a 25% portfolio-level diversification cap. In parallel, Angel Funds have been designated as a standalone sub-category under Category I AIFs, with clarity on allocation methodologies, reporting requirements and governance obligations.

  Shorter lock-in periods are intended to enhance exit flexibility and support secondary transactions. At the same time, restricting participation to Accredited Investors narrows the angel capital pool and possibly reduces the accessibility of early-stage funding for startups, which may temper the pace of smaller, founder-led M&A transactions. The amendments exclude companies affiliated with large industrial groups and limits angel participation in group-linked platforms

10.  Banking, Financial Services and Insurance: Acquisition Financing as a Catalyst for Consolidation

Acquisition financing in India’s Banking, Financial Services and Insurance (“BFSI”) sector has long operated under strict regulatory constraints, with commercial banks prohibited from funding share acquisitions. Consequently, M&A transactions were largely financed through sponsor equity, non-bank lenders, and private credit funds, with leveraged structures developed outside the banking system.

This long-standing position underwent a decisive shift in October 2025. Following the RBI Governor’s policy announcement on October 1, 2025, the Reserve Bank of India issued the Draft Reserve Bank of India (Commercial Banks – Capital Market Exposure) Directions, 2025 on October 24, 2025²⁷. These Draft Directions mark a watershed moment by formally proposing an enabling framework for commercial banks to finance M&A undertaken by Indian corporates. Under the proposed Directions, acquisition financing is permitted subject to stringent eligibility, leverage, and exposure controls. Banks may fund up to 70% of the acquisition value, with a mandatory minimum 30% equity contribution from the acquirer. Eligibility is restricted to listed, profit-making Indian companies with a proven financial track record, while acquisitions must result in control over the target and be fully secured by pledged shares of the target company.

These norms, expected to take effect in 2026, seek to expand the suite of financing options available to Indian acquirers and align India more closely with global acquisition finance practices.

11.  Public M&A: Towards a Unified Securities Market Framework

India is progressing towards a major overhaul of its securities law architecture through the Securities Markets Code Bill, 2025²⁸, introduced in Parliament in December 2025. The proposed Code seeks to consolidate the Securities and Exchange Board of India Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996 into a single, unified securities law framework.

A key feature of the Code is the rationalisation of enforcement by shifting certain minor and procedural non-compliances from criminal liability to a civil penalty regime, aimed at addressing concerns around over-criminalisation for directors, key managerial personnel and compliance officers. The Code also proposes institutional changes to SEBI’s governance framework, including expansion of the SEBI Board to 15 members and stronger conflict-of-interest disclosure norms to enhance regulatory capacity and accountability.

These developments signal an evolving public M&A landscape in India, with a trend towards consolidation of regulatory statutes and incremental refinement of takeover norms to enhance clarity, investor protection and procedural efficiency in public acquisitions, with relevance for public market activity in 2026 and beyond.

12.  Rising recourse to warranty and indemnity (“W&I”) insurance to cover unknown risks

W&I insurance has been on the rise in the recent past across small, mid and large-size transactions alike. Factors that have bolstered this trend include: (i) increased comfort of strategic acquirers and Indian corporates to consider W&I insurance; (ii) growing risk appetite of insurers to cover newer-age risks; (iii) stringent internal policy requirements for acquirers, to ensure sufficient backing of indemnity obligations in case of occurrence of a breach; and (iv) growing discomfort of sellers / companies to back obligations upon a complete exit. Further, with the spread of W&I insurance across deals and sectors, stakeholders (such as legal counsel, parties to the transaction, financial advisors and bankers) have also become adept with the underwriting process. This has led to the market generally taking commercial calls that are commensurate with deal expectations, which only increases comfort of parties when opting for W&I insurance. Additionally, the development of innovative add-ons in the market to W&I insurance (such as a data room scrape / additional premium cover for anti-bribery and anti-corruption in select instances), coupled with products such as fund life insurance, has only increased desirability of this product in the market.

From a deal perspective, the growing use of W&I insurance is influencing how parties approach the scoping and overall depth of diligence, disclosure standards (including specificity of disclosure letters and data rooms) and risk allocation in transaction documents. That said, W&I insurance is expected to only be able to reach its full potential in India once the cross-border reinsurance restrictions surrounding premium collection by offshore insurers are relaxed.

13.  Increased establishment of global capability centres (“GCCs”) by foreign conglomerates

India has crossed 1,900+ GCCs in 2025 and now hosts more than 53% of global GCCs.²⁹ This expansion supports over 1.9 million jobs and is estimated to generate USD 64–65 billion in annual economic value. States such as Karnataka,³⁰ Tamil Nadu³¹, Telangana³², Maharashtra³³ and Gujarat³⁴ have rolled out / updated dedicated GCC policies to offer targeted incentives including capital subsidies, rental reimbursements, payroll-linked incentives, and fast-track regulatory clearances.

From a deal-making perspective, these foreign entities are increasingly opting to acquire existing Indian service providers or carve out GCC-ready platforms, rather than build greenfield centres, to accelerate time-to-market and secure specialised talent pools. Private equity funds are also setting up GCCs by backing platform plays that combine captive services, IP ownership and annuity-based global delivery contracts. This momentum is expected to carry into 2026, with GCC-related transactions spanning carve-outs, build-operate-transfer models, minority investments and strategic partnerships. We expect that going forward, GCCs shall be expected to feature not only as operational centres, but as strategic assets.

It is to be noted that GCC transactions present a distinct set of legal and commercial considerations, including employment transitions, IP ownership and licensing, data protection compliance, and transfer pricing alignment. As GCCs move towards core value creation and innovation, acquirers and investors are likely to focus more closely on governance structures, scalability and long-term integration models, which will involve strategic legal assistance in relation to documentation, structuring and implementation.

Further, the policy momentum and institutionalisation of GCCs is expected to significantly influence deal strategy. As multinationals continue to rationalise global operations and re-anchor critical functions in India, GCCs are set to remain a key driver of inbound deals.

14.  Private credit as an alternative mode of investment

India’s private credit market is estimated to have crossed USD 25 billion in assets under management, growing at over 25% CAGR, driven primarily by domestic and offshore funds operating through Category II AIFs and offshore lending structures.³⁵

Private credit is expected to further solidify as a key financing solution and increase deal-making activity in 2026, particularly in situations where traditional bank financing remains constrained or unsuitable. The asset class has gained momentum in recent years, supported by regulatory limitations on bank lending, the need for flexible capital solutions and increasing comfort among sponsors with non-bank lenders. Private credit funds are increasingly participating in acquisition financing, structured debt, mezzanine instruments and bespoke capital solutions tailored to transaction-specific risks.

In the context of deal-making, the rise of private credit is influencing transaction timelines, leverage profiles and intercreditor arrangements. While private credit offers speed and structural flexibility, it also introduces considerations around pricing, covenant packages and enforcement dynamics. In 2026, private credit is likely to remain a critical enabler of leveraged transactions, particularly for mid- to large-cap deals, and will continue to shape how acquirers balance cost of capital against execution certainty.

CONCLUSION

As Indian M&A enters 2026, deal-making is being shaped by a confluence of global uncertainty and domestic resilience. While geopolitical fragmentation, regulatory recalibration and evolving capital markets continue to influence investor behaviour globally, India’s relative policy stability, scale and depth position it as a compelling jurisdiction for sustained transactional activity. The market is witnessing a clear shift towards larger, more complex transactions, greater emphasis on control, and increasingly sophisticated structuring across financing, risk allocation and governance.

At the same time, evolving tools such as warranty and indemnity insurance, private credit and IFSC-based fund structures are reshaping how transactions are executed, and risks are managed. Sector-specific reforms and policy initiatives are also creating new opportunities, while heightened regulatory scrutiny underscores the importance of careful diligence and thoughtful deal structuring. Taken together, these trends suggest that 2026 is likely to be characterised not merely by higher deal volumes, but by a more mature, disciplined and strategically driven M&A environment in India.

Smita Singh, Kamini Toprani, Parina Muchhala and Nishchal Joshipura
You can direct your queries or comments to the authors.

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