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Domestic Investment in India

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Domestic Investment in India

November, 2014


The Government of India has taken several long strides in the past few years to develop the overall economic condition of the country and make it one of the strongest economies in the world. India is fast becoming home to startup companies focused on high growth areas such as mobility, e-commerce and other vertical specific solutions - creating new markets and driving innovation.

With the new Indian government showing signs of economic reforms and implementing new policies, the country's economy could achieve a growth rate of 5.5 per cent in 2014 as compared to 4.7 per cent last year, according to the World Bank. Furthermore, liberalisation of the economy and growing need for investment have resulted in a more investor-friendly climate in India.

Market size

Private equity (PE) deals worth US$ 526 million were sealed in August 2014, taking the tally to US$ 7.7 billion for the first eight months of 2014. Also, as per Grant Thornton, the volume of deals in the PE space increased in 2014 and the Information Technology (IT) and IT enabled Services (ITes) sector garnered the maximum number of deals.

India has emerged as one of the strongest performers in the deal-street across the world as mergers and acquisitions (M&A) of Indian corporates increased 10 per cent in the first half of 2014. Also, considering a 12-month period, the Indian market has recorded a 21 per cent rise in M&A deals compared to a 16 per cent global rise.


With the improvement in the economic scenario, there has been quite a few investments in various sectors along with M&A in India. Some of them are as follows:

  • Indian medical technology company Trivitron Healthcare has acquired Mumbai-based imaging accessories manufacturer Kiran Medical Systems, and Imaging Products (India) Pvt Ltd (IPI).
  • Larsen & Toubro (L&T) has bagged a Rs 1,630 crore (US$ 263.57 million) order from the Uttar Pradesh Expressways Industrial Development Authority to build a six-lane access controlled expressway from Neval village in Unnao district to Lucknow. The engineering, procurement and construction (EPC) contract entails completion of the 63 km expressway within 36 months.
  • The online food and grocery retailer LocalBanya plans to raise Rs 250-300 crore (US$ 40.42-48.51 million) to expand operations beyond Mumbai over the next couple of years. The company also raised funds from real estate firm Karmvir Avant Group earlier in 2014.
  • IDFC Alternatives Ltd has sold two of its real estate investments to PE firm Blackstone Group LP. The assets-a special economic zone (SEZ) in Pune and an IT park in Noida-were sold for a combined enterprise value of Rs 1,100 crore (US$ 177.87 million).
  • Strides Arcolab plans to acquire Chennai-based Shasun Phamaceutical in an all-stock transaction that will create a combined entity with a turnover of Rs 2,500 crore (US$ 405.66 million). As part of this acquisition, shareholders of Shasun will get five equity shares of Strides in lieu of 16 Shasun shares.
  • Peppermint Hospitality has aggregated close to 2,200 operational hotel rooms across the country with the acquisition of Bengaluru-based Boutique Hotel Management & Marketing Services Ltd, which has 60 hotels in its portfolio.

Government Initiatives

The Government of India has taken several initiatives in various sectors to improve the overall economic condition in the country. Some of these are:

The Government of India has planned to set up a Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) near Bina, Madhya Pradesh with an investment worth around Rs 1 trillion (US$ 16.17 billion). This would be the fifth PCPIR in the country and the first in a land locked state.

  • The fourth Global Investors Summit in Madhya Pradesh has witnessed a group of central ministries and representatives of the industry making commitments to invest about Rs 6.79 trillion (US$ 109.79 billion) in the state over the next few years.
  • Oil and Natural Gas Corporation (ONGC) plans to invest Rs 81,800 crore (US$ 13.22 billion) to bring new discoveries into production and check the decline in output from ageing fields. The company has taken up 15 projects for development. Of these, seven are complete and eight are under implementation.
  • The Government of India plans to implement infrastructure projects worth Rs 2 trillion (US$ 32.34 billion) this year to underline the priority of the sector in the overall economy. Majority of the funds would be used for either building new highways or widening existing ones in order to keep pace with the needs of a growing economy.
  • Mr Narendra Modi, Prime Minister of India, has launched the 'Make in India' initiative with the aim to give the Indian economy global recognition. This initiative is expected to increase the purchasing power of the common man, which would further boost demand, and hence spur development, in addition to benefiting investors.

Road Ahead

The International Monetary Fund (IMF) and the World Bank in a joint report has forecasted that India will register a 5.6 per cent growth rate this year and 6.4 per cent in 2015, due to renewed confidence in the market brought about by a series of economic reforms pursued by the government.

The amount of IT spending in India is expected to touch US$ 73.3 billion in 2015, which will be an increase of around 9.4 per cent from the 2014 forecast, as per research firm Gartner.

Also, the 'Make in India' initiative undertaken by the Government of India is likely to bring about positive economic reforms into the country as well as encourage more domestic investments in the next few years.

Exchange Rate Used: INR 1 = 0.016 as on November 27, 2014

References: Press Information Bureau (PIB), Media Reports, Department of Industrial Policy and Promotion (DIPP), Securities and Exchange Board of India (SEBI)