The following article featured in Chambers Private Equity 2025 Practice Guide and is awaiting update from the firm.

Over the past year, private equity (PE) and mergers and acquisition (M&A) activity has shown signs of both recovery and recalibration. Based on publicly available data, deal volumes and values picked up meaningfully in India after two subdued years, with overall PE-VC investments rising to about USD43 billion in 2024. Growth and venture capital were the main drivers, particularly in consumer technology and healthcare, while traditional PE investments remained steady at around USD29 billion. Control transactions became a defining feature, with buyouts accounting for more than half of PE deal value in deals such as KKR’s acquisition of Healthium MedTech (USD843 million) and Brookfield India REIT’s purchase of Bharti real estate assets (USD723 million).

Sector-wise, infrastructure and real estate drew the largest share of capital, supported by large telecom tower and housing transactions including Data Investment Trust’s USD2.5 billion acquisition of ATC India Tower Corporation and Highways Infrastructure Trust’s USD1.09 billion purchase of 12 highway assets from PNC Infratech. Financial services attracted investment in affordable housing finance and NBFC (Non Banking Financial Companies) lending. Healthcare also saw meaningful activity in medtech, pharma and outsourcing, with regional platforms consolidating and transactions such as the proposed Aster DM Healthcare–Quality Care India merger (USD5 billion) reshaping the hospital landscape. IT and IT-enabled services stood out with a surge in revenue cycle management and platform deals, reflected in New Mountain Capital’s USD1.5 billion investment in Access Healthcare Services, the largest deal in this sector.

Exits became a story in themselves. Investors realised USD33 billion in 2024, the highest on record, with IPOs and block trades dominating. Strategic sales added further momentum. However, the IPO market cooled in early 2025, as investors faced mid-cap volatility and valuation mismatches, limiting the window for large-scale public exits.

Beyond PE, the broader M&A tape also strengthened: 2024 logged 683 deals worth USD44.1 billion, with domestic transactions as the main driver and outbound registering its highest deal count since 2012. This mix reflects strategic consolidation at home, such as Mankind Pharma’s USD1.64 billion acquisition of Bharat Serums and Viacom18’s USD8.5 billion merger with Disney Star India, coupled with selective overseas acquisitions for technology and brand assets, including Bharti Enterprises’ USD4 billion stake in British Telecom.

Public M&A remained robust, with open offers such as Torrent – JB Chemicals, JSW Paints – Akzo Nobel India, reflecting continued interest in control strategies even as equity markets experienced valuation gaps and periodic volatility.

The past year reflects a maturing investment landscape: larger control deals, record exit activity and deeper governance expectations, even as global uncertainty and valuation pressures temper the pace of new transactions.

Private equity activity in India in 2025 has clustered around infrastructure, financial services and technology. According to publicly available market data and reports, infrastructure led with USD5.8 billion across 29 deals, followed by financial services with USD4.0 billion across 103 deals and technology with USD3.8 billion across 81 deals. By deal type, start-ups raised USD6.8 billion across 366 transactions, growth investments accounted for USD6.5 billion across 113 transactions, buyouts reached USD6.2 billion across 26 deals, and private investments in public equities (PIPEs) contributed USD2.7 billion across 40 deals. This distribution shows that while early-stage and growth rounds dominate in terms of volume, larger control-oriented deals remain a defining feature by value.

The macro-economic environment has been broadly supportive. The Reserve Bank of India (RBI) delivered a larger-than-expected 50 bps cut to its benchmark rate (lowering it to 5.5% in June 2025), easing funding costs, while India’s GDP growth remained resilient compared with global peers. However, equity markets have been uneven – large-cap indices stayed firm, but volatility in mid- and small-caps has dampened IPO activity and slowed exits pushing sponsors towards private exits and blocks.

On the geopolitical front, US tariff hikes on Indian goods of up to 50% along with rupee depreciation and foreign portfolio outflows have weighed on cross-border appetite and dollar-linked financing, reinforcing a tilt to domestic consolidation. Meanwhile, India has deepened its energy and trade ties with Russia, including discounted crude purchases settled through non-dollar channels, which bolsters near-term cash flows. Relations with China remain delicate; after years of sharp frictions, recent signals of greater engagement within multilateral forums such as BRICS suggest a potential shift towards more pragmatic ties. If this trend continues, it may gradually ease investor concerns and encourage more regional capital into India.

In the past 18 months, India has introduced a series of legal and regulatory changes that are relevant to private equity investors.

Competition Law

Until recently, India’s merger control regime was primarily triggered by asset and turnover thresholds, which meant that acquisitions of high-value businesses (such as digital, tech and pharma) with limited assets or revenues often escaped scrutiny. Amendments (effective September 2024) have reshaped this regime, expanding the scope of notifiable transactions and making early competition analysis a central step in deal planning.

• Deal value threshold – The amendment introduced a deal value threshold requiring notification of transactions above INR2,000 crore (approximately USD230 million) where the target has material business presence in India. This closes the gap through which high-value but low-revenue tech, digital and pharma transactions previously escaped review.
• Green channel – The automatic “deemed approval” route remains for combinations with no overlaps, but the definition of “affiliate” now extends to entities that share competitively sensitive information through minority stakes or contractual rights. For PE funds with multiple portfolio companies, this broadens the range of situations requiring filings, since even standard rights such as vetoes or board observers may be viewed as creating overlaps.

Early antitrust analysis has therefore become a standard part of deal planning for PE investors. Minority or early-stage investments in high-value platforms may now require Competition Commission of India (CCI) clearance, and standard rights such as information rights or negative control may itself trigger a filing. From a practical standpoint, this adds time and cost to deal execution.

Foreign Exchange Regulations and Fast-Track Inbound Mergers

Sectoral reforms have opened up new opportunities for private equity. In 2024, the government liberalised foreign direct investment (FDI) norms in the following.

• Space sector – Up to 74% FDI is now allowed automatically in satellites and data products, and 100% in manufacturing of satellite components.
• Insurance – The FDI cap was raised from 74% to 100% for insurers.

Since August 2024, Indian companies have been permitted to issue or transfer shares in exchange for shares of foreign companies without prior government approval. In addition, inbound mergers between a foreign parent and its wholly owned Indian subsidiary that previously required approval from the National Company Law Tribunal can, from September 2024, proceed through a fast-track route overseen by the Regional Director of the Ministry of Corporate Affairs. Together, these changes reduce procedural delays and make cross-border restructurings easier to implement.

This streamlines group restructurings and also provides Indian businesses with overseas holding entities a quicker path to “flip back” into India. For PE sponsors, these measures are particularly useful in aligning portfolio structures with India-focused exit strategies such as domestic IPOs or strategic sales.

In January 2025, the Reserve Bank of India clarified that foreign-owned and controlled companies (FOCCs) can also use mechanisms such as share swaps, escrows and deferred consideration, bringing them on par with other foreign investors. This creates more flexibility for PE-backed portfolio companies when structuring downstream investments.

Securities Regulation: IPOs and Delisting

Delisting rules have also been liberalised in September 2024, allowing companies with frequently traded shares to use a fixed-price delisting mechanism, at a minimum of 15% above the regulatory floor price. This brings greater price certainty compared to the earlier reverse book-building method, which was prone to speculative bidding. The counter-offer threshold has also been lowered from 90% to 75%, and the floor price is now calculated from the date of public announcement, ensuring a closer alignment with prevailing market conditions. For private equity funds, these reforms make it more feasible to take controlled portfolio companies private.

Private equity and M&A activity in India is shaped by a complex but co-ordinated set of regulators and rules, each playing a distinct role in how transactions are structured and executed.

FDI Policy and Exchange Control

At the heart of cross-border investment are the Department for Promotion of Industry and Internal Trade (DPIIT), which frames the FDI Policy, and the RBI, which enforces exchange control under the Foreign Exchange Management Act 1999 (FEMA). The FDI framework is organised around sectoral caps and conditions, with investments proceeding either on the automatic route – requiring no prior approval – or the government approval route. While most sectors fall under the automatic route, FDI in certain businesses such as multi-brand retail, public-sector banking, defence, satellites and brownfield pharmaceuticals remain subject to approval, often once foreign ownership crosses specified thresholds.

Press Note 3 of 2020 introduced an additional layer by mandating government approval for investments originating from, or with beneficial ownership traceable to, jurisdictions sharing a land border with India. In practice, this has largely impacted Chinese capital flows and has also caught indirect structures (including Chinese LP funding into non-Chinese funds). While India does not operate a standalone CFIUS-style national security regime (Committee on Foreign Investment in the United States), security considerations are embedded within the FDI approval process. In sensitive sectors such as broadcasting, telecom, aviation, defence, and mining of titanium-bearing minerals, security clearance from the Ministry of Home Affairs is required. Importantly, the review lens is driven by jurisdiction and sectoral sensitivity rather than investor type: sovereign wealth funds and other state-sponsored vehicles are subject to the same FDI/security scrutiny as private financial sponsors, though they may enjoy separate tax treatment or be registered under more favourable categories for portfolio investment.

For private equity sponsors, the implications are practical. Approval requirements and embedded security checks can introduce delay and uncertainty that may impact timelines, which can be critical in competitive auction scenarios. Exchange-control rules also affect deal design. FEMA imposes pricing guidelines that require primary issuances to foreign investors at or above fair market value, and prohibit secondary transfers below that benchmark. Deferred consideration is capped both in amount and duration, and equity investments cannot carry guaranteed returns or assured exit values. While these safeguards protect capital flows, they limit flexibility for private equity investors in structuring entry valuations, earn-outs, downside protections and bespoke exit mechanisms. Put and call options are permitted but only within fair-value parameters and after regulatory lock-ins, which makes the valuation mechanics in share purchase or subscription agreements a central issue in negotiations.

Securities Regulations

Listed company transactions bring the Securities and Exchange Board of India (SEBI) into play. As the capital markets regulator, SEBI oversees takeovers, open offers, insider trading, preferential and rights issues, IPOs and delistings. Its remit extends beyond issuers to cover investment vehicles themselves: Alternative Investment Funds (AIFs), where it prescribes sponsor commitment, valuation and governance norms; Foreign Portfolio Investors (FPIs), where it focuses on registration, beneficial ownership transparency and trading rules; and Foreign Venture Capital Investors (FVCIs), who enjoy relatively flexible pricing and lock-in exemptions when backing early-stage companies. Each of these routes is relevant for private equity sponsors. FDI is typically used where control or board rights are sought. FPI offers speed and liquidity for listed exposure but is unsuitable for control positions. The FVCI route is valuable for early-stage or sector-specific investing where flexibility on pricing is critical, with investors later transitioning to FDI or IPO exits. These frameworks also directly affect how PIPEs are structured:

• preferential allotments must comply with pricing formulas, shareholder approvals and lock-ins;
• secondary market blocks follow different compliance tracks;
• takeover rules can trigger mandatory open offers at 25% or upon acquisition of “control”; and
• insider-trading rules require careful handling of due diligence and wall-crossing protocols.

Corporate and Antitrust Regulations

The Ministry of Corporate Affairs (MCA) provides the company law backdrop, overseeing incorporations, reorganisations and governance under the Companies Act 2013. For private equity, this translates into shareholder rights’ packages, director nominations and corporate approvals being carefully structured within statutory constraints. Merger control lies with the Competition Commission of India (CCI). India is a suspensory jurisdiction: combinations crossing thresholds must be notified and cleared before closing. “Control” is interpreted broadly, covering not only majority ownership but also extensive veto rights, board or observer seats, and access to competitively sensitive information. These features are common in minority private equity positions and platform roll-ups, making competition analysis relevant even where the investor is not acquiring a majority stake. The introduction of a deal-value threshold has further widened CCI’s remit to cover high-value, low-revenue businesses, particularly in digital and technology sectors, adding to filing burdens for private equity.

Sector-Specific Regulators

Sector-specific regulators add a final layer:

• the RBI oversees banks, Non Banking Financial Companies (NBFCs) and housing finance companies (HFCs);
• the Insurance Regulatory and Development Authority of India regulates insurance;
• the Department of Telecommunications and Telecom Regulatory Authority of India govern telecom;
• the Ministry of Civil Aviation and Directorate General of Civil Aviation supervise aviation; and
• the Ministry of Defence is involved in defence.

“Fit and proper” and change-of-control approvals can be triggered at thresholds as low as 5%–10% in banks and insurers, or 26% in NBFCs and HFCs. For private equity sponsors, these low triggers mean regulatory engagement often becomes the critical path in a transaction timeline.

Anti-Bribery Sanctions and ESG Compliance

Compliance expectations continue to rise beyond corporate and capital markets rules. While no new anti-bribery or sanctions statutes have been enacted in the past year, enforcement activity has seen a steady increase. Sanctions screening – particularly in connection with Russia or Iran-linked trade, shipping and payment chains – is now routine in diligence, warranties and covenant packages. This is driven also by sanctions-related enforcement in the USA. Anti-bribery checks and post-closing remediation are now routine in government-facing sectors, while anti-money laundering reviews are increasingly central to diligence, particularly in financial services and other entities with heightened reporting obligations. On ESG, SEBI’s Business Responsibility and Sustainability Reporting (BRSR) and BRSR-Core have introduced heightened disclosure and assurance standards for India’s top listed companies, which directly shapes IPO readiness and has pushed ESG metrics into vendor diligence and value-creation planning for private equity exits.

EU FSR Regime

Although not part of Indian law, the EU Foreign Subsidies Regulation (FSR) is becoming relevant in cross-border deals. Where an Indian sponsor or its portfolio acquires an EU target above FSR thresholds, and the fund group has received foreign financial contributions from non-EU states or state-linked investors over the look-back period, FSR filings may be required. Large global managers with India–EU footprints are now running FSR assessments alongside EU merger control and FDI reviews, though purely domestic Indian deals remain unaffected.

The scope of legal due diligence depends on the client’s objectives, the target’s business, public or private status, transaction structure, and access to information. It is typically conducted through virtual data rooms backed by management interviews, and public or regulatory searches. In auction processes, bidders may rely on vendor due diligence reports with limited confirmatory checks, while bilateral deals usually involve comprehensive buyer-led diligence. Materiality thresholds, based on deal size and sector, generally limit the review to the past three to five years. Reports are often red-flag in nature, highlighting key risks, with vendor reports sometimes broader but still requiring buyer confirmation.

Core areas of focus include:

• corporate validity and shareholding;
• regulatory and foreign investment compliance;
• material contracts and related consents;
• employment terms and labour compliance;
• ongoing disputes and potential liabilities;
• title and encumbrances over real estate and assets;
• intellectual property ownership and licences;
• sector-specific and environmental issues;
• data protection and cybersecurity compliance (especially under the new Digital Personal Data Protection regime for technology-driven businesses); and
• insurance coverage, including liability, directors’ and officers’ liability, and cyber cover.

Vendor due diligence (VDD) is now common in auction processes or where there are multiple buyers and a tight timetable. Typically, sellers or the target company circulate an issues-based legal VDD report to create a level playing field and accelerate bids. Bidders may still run confirmatory diligence and use Q&A to probe gaps, but the sell-side pack improves comparability and speed.

By contrast, VDD is less common in bilateral sales. In one-on-one processes, sellers typically prefer buyer-led diligence supported by an information memorandum and structured data-room access.

On reliance, market practice in India is that the winning bidder does receive reliance on the VDD report, albeit heavily caveated. Reliance is usually delivered via a reliance letter after signing/closing, capped in amount and duration, and subject to customary disclaimers. In auctions, interim access is “for information only” for all participants; broader reliance across the field is rare. In bilateral deals, reliance can be negotiated but is not automatic. This calibration balances bidder comfort with adviser liability and aligns with growing use of warranty and indemnity (W&I) insurance and focused sell-side disclosure.

Structure of the Acquisition

Private equity investments in India are usually structured either as primary issuances (subscriptions to fresh shares, typically to fund growth) or secondary purchases (acquisitions from existing shareholders, including promoters or financial investors). Even after navigating the entire process, there is no certainty that the remaining minority shareholders can be successfully taken out.

The most common entry routes are privately negotiated share purchase agreements or subscription agreements, almost always coupled with a shareholders’ agreement that governs governance rights, information covenants and exit options (IPO, trade sale, put/call rights, etc). Court-approved schemes of arrangement, mergers or share swaps are rarely used as entry structures in private equity transactions; these are generally confined to group reorganisations, strategic M&A, debt restructurings or promoter-led consolidations, given their procedural complexity and timelines.

For foreign private equity investors, the form of investment is circumscribed by India’s FDI rules. Permissible instruments are limited to:

• equity shares;
• compulsorily convertible preference shares;
• compulsorily convertible debentures; and
• share warrants.

Instruments that are non-convertible or only optionally convertible are treated as external commercial borrowings, subject to an entirely different regulatory regime, and therefore not available for equity-style investments by foreign PE funds.

Listed company company acquisitions may trigger mandatory open offers under the SEBI Takeover Regulations if a PE fund acquires 25% or more of the voting rights, or “control” (a broad concept that can include veto rights).

The terms of acquisition vary significantly depending on whether the deal is a bilateral negotiation or conducted through a structured auction process. Privately negotiated transactions allow far greater flexibility. Parties can negotiate bespoke arrangements on:

• pricing mechanisms (fixed price, locked box or completion accounts);
• conditions precedent;
• indemnity and warranty packages;
• governance rights;
• information covenants; and
• exit structures (IPO, strategic sale, drag/tag rights, etc).

These transactions often feature detailed negotiations on risk allocation, including caps, baskets, de minimis thresholds and escrow arrangements.

Auction transactions, by contrast, are conducted on the basis of seller-prepared auction drafts circulated to bidders. These drafts are usually seller-friendly, limiting the buyer’s ability to negotiate risk allocation. Indian auction processes typically feature:

• tighter warranties;
• narrower indemnity coverage;
• shorter claim periods; and
• compressed execution timetables.

While shortlisted bidders may negotiate certain commercial terms (valuation, specific diligence findings), auctions generally “lock in” baseline terms, compelling PE bidders to focus on identifying and negotiating only must-have protections while accepting market-standard terms on other issues.

In private equity transactions, the investment is generally routed through a layered structure. The sponsor establishes a holding company, which in turn owns a special purpose vehicle (commonly referred to as the BidCo) that serves as the contracting party. While the fund typically controls the BidCo, it is the BidCo – not the fund – that signs the acquisition agreement with the seller.

Private equity transactions in India are typically financed through a combination of sponsor equity and third-party debt, with a greater emphasis on equity funding.

On the equity side, the market does not generally follow the US/UK practice of issuing formal equity commitment letters. Certainty of funds is instead provided through the definitive share purchase or subscription agreement itself, supported by standard contractual representations on adequacy of funds, proof-of-funds at signing, and, in rare cases, deposit or escrow mechanisms. While sellers in competitive auctions may ask for a letter of comfort from the fund and, occasionally, a short-form equity commitment letter, these remain the exception rather than the rule. In bilateral transactions, sellers are usually satisfied with contractual undertakings.

Debt financing of acquisitions is less common in India on account certain regulatory constraints. Domestic banks face restrictions on providing acquisition finance; and exchange-control regulations generally prevent offshore lenders from securing their loans with pledges or guarantees from Indian targets. As a result, leveraged acquisition structures typically involve raising debt at the holding company or BidCo level, often through SPVs in Singapore, Mauritius or the Netherlands, or, domestically, through rupee term loans or non-convertible debentures sourced from NBFCs, or private credit funds, though domestic debt financing is not very common.

Fully committed “certain funds” debt packages at the time of signing are rare. More typically, lenders issue sanction letters or term sheets subject to customary conditions, with definitive documentation and drawdown occurring closer to closing. Sellers are given comfort primarily through the equity backstop already described.

Over the past twelve months, rising interest rates and a tightening credit environment have reinforced the equity-driven nature of Indian private equity transactions. Sponsors have increasingly turned to creative structuring tools to bridge funding gaps, including seller deferrals and earn-outs, promoter rollovers, and structured equity or quasi-debt instruments such as convertible debentures and mezzanine funding.

In India, consortium investments involving multiple private equity sponsors are increasingly common, particularly in large-scale transactions across infrastructure, healthcare, renewables and technology. Pooling capital allows funds to underwrite sizeable deals while diversifying risk, and one sponsor typically takes the lead in governance and negotiations. Co-investment structures are also very prevalent. Often sovereign wealth funds, pension funds and family offices co-invest alongside private equity sponsors. These co-investments are often passive stakes by LPs in funds where they are already investors, structured to give them direct exposure to the portfolio company with more favourable economics and governance visibility.

A further trend is consortia combining private equity sponsors with corporate investors. Though less common, these may be visible in green energy, infrastructure and technology, where corporates bring sectoral expertise and market access while financial sponsors provide capital and structuring capability. The key challenge in such structures is aligning investment horizons and exit mechanics, as corporates often have strategic, longer-term objectives compared to PE funds’ defined return timelines.

In India, the predominant consideration structure in private equity transactions is cash consideration. While non-cash consideration such as share swaps is legally permissible, it is rarely used because of potential tax impact on sellers leaving them out of pocket. Within cash-based structures, fixed price is most common; however, locked-box mechanisms have gained ground in recent years, particularly in competitive or auction processes where sellers favour price certainty.

Completion account-style adjustments are also employed, usually to cover working capital or net debt positions. Earn-outs and deferred consideration do feature in Indian deals, but their deployment is constrained by regulatory limits. Foreign investors, for instance, may defer up to 25% of the consideration for a maximum of 18 months. Earn-outs are usually negotiated as part of management incentive structures, but they are not a standard feature across the market.

Roll-over of founder equity may also be seen in buyouts and secondary deals, especially where investor alignment with the existing management team is important.

The involvement of a private equity fund significantly shapes the consideration mechanism. PE sellers generally seek clean exits: they limit warranties to title and authority, cap indemnity exposure, avoid long-tail liabilities, and resist contingent or deferred consideration. Where additional protection is required, buyers increasingly rely on warranty and indemnity insurance in lieu of escrow. PE buyers, on the other hand, are more exacting in their approach, favouring completion adjustments, deferred payments and escrow-backed indemnities to protect value. They also negotiate comprehensive warranty packages from promoters or management, unlike corporate acquirers who may be more willing to rely on operational diligence.

Overall, while cash and fixed-price consideration remains the norm, the Indian market has seen increasing use of locked-box pricing, escrow retentions, deferred payment structures and insurance solutions.

Locked-box consideration structures are used in private equity transactions in India, though not frequently, and are more often seen in larger, competitive auction processes where sellers seek price certainty. Where locked-box pricing is agreed, it is not typical in India for the buyer to pay an additional ticking fee or interest on the equity value during the locked-box period. Sellers sometimes try to negotiate them in competitive or sponsor-to-sponsor deals, but they are not a standard feature in domestic transactions. In cross-border transactions, payment of interest or ticking fee to non-resident or FOCC sellers presents challenges in compliance with pricing guidelines, making this unviable. What is more common is the inclusion of leakage protections: sellers covenant that no value will be extracted from the target during the locked-box period, save for agreed permitted leakage. If unpermitted leakage does occur, the market practice is for the buyer to be reimbursed on a rupee-for-rupee basis by way of an indemnity.

In private equity transactions, the approach to dispute resolution in relation to purchase price mechanisms is closely linked to the type of consideration structure adopted.

In locked-box deals, the purchase price is fixed by reference to historical accounts, with economic risk passing at the locked-box date. Post-closing disputes are rare and usually confined to claims for “leakage”. These are resolved through contractual indemnities with repayment, and seldom require an expert, as the structure is designed to deliver price certainty and avoid adjustment processes.

By contrast, completion account structures rely heavily on expert determination. The SPA prescribes a process for preparing and reviewing the accounts, with unresolved items referred to an independent accounting expert. Typically, this is a Big Four firm whose decision is final and binding save for manifest error.

In earn-out arrangements, the process for accounting disagreements includes referral to an independent expert (again, often Big Four), while broader contractual issues may be resolved through arbitration.

In Indian private equity transactions, beyond statutory or regulatory approvals, private equity buyers often impose a broad set of conditions precedent, while retaining the right to waive them. Third-party consents are a common example, particularly where key commercial contracts, government licences, leases or financing agreements contain change-of-control or assignment restrictions. Where such consents are critical, they are structured as conditions precedent; less critical consents are often deferred into post-closing covenants. In bilateral deals, funds have more latitude to insist on broad consents, whereas in competitive auctions the set of conditions is narrowed to only those consents that are truly material. Shareholder approvals may also be necessary under the Companies Act (eg, for preferential allotments) or under the target’s charter.

Material adverse change/effect provisions (MAC) are seen but tend to be narrowly drawn and hotly negotiated. At the time of exit, private equity sellers resist broad MAC clauses, and where they are included, they are typically confined to fundamental matters – such as insolvency of the target or illegality of the transaction – rather than broader business performance triggers.

In India, “hell or high water” undertakings are generally not accepted in private equity transactions. Instead, buyers typically agree to make the necessary filings promptly and to pursue approvals using “reasonable best efforts” or similar language. Given the uncertainty and sometimes open-ended nature of Indian regulatory processes, the allocation of risk where approvals are delayed or denied is usually a matter of negotiation between the parties.

Where undertakings are negotiated, a distinction is often drawn between merger control approvals and FDI approvals. For merger control, particularly where there is a clear substantive risk of the CCI raising concerns, sellers may push for stronger buyer undertakings, but “hell or high water” commitments (eg, agreeing to divest assets or accept behavioural remedies unconditionally) are rarely given. For foreign investment approvals under India’s FDI policy, undertakings are typically limited to making the application and pursuing it in good faith, without requiring the buyer to accept onerous conditions.

Break fees in favour of sellers are unusual in Indian private equity transactions. Where agreed, they tend to be modest (about 1–3% of deal value) and triggered by buyer default, breach of exclusivity or withdrawal without cause. Reverse break fees, where the buyer compensates the seller for failing to complete, are somewhat more common, particularly in cross-border, regulatory-sensitive or auction processes. These too are typically modest (1–3% of deal value) and are aimed at reinforcing deal certainty rather than penalising the buyer.

From a legal standpoint, break fees are subject to India’s contract law on liquidated damages. Courts may strike down fees that are considered penal rather than a genuine pre-estimate of loss. As a result, Indian parties remain conservative in setting break fees.

Termination rights typically arise where:

• a party commits a material breach of warranties, covenants or obligations that prevents closing;
• mandatory approvals are denied or rendered legally impossible; or
• closing has not occurred by the agreed longstop date.

Longstop dates are calibrated to allow satisfaction of regulatory and contractual conditions. In Indian PE deals, these typically range from 45 to 60 days in straightforward transactions, and from four to six months where approvals from regulators are required.

When exiting, private equity funds in India aim to limit post-closing exposure. They typically restrict their liability to fundamental matters – title, authority, ownership and pre-closing taxes (particularly withholding tax exposures that a buyer may be required to bear in its capacity as a representative assessee under Indian law) – and avoid broader business warranties. Holdbacks and survival tails are resisted, unless narrowly tailored to address specific indemnities. In competitive auction processes, it is increasingly common for sellers to insist on a W&I insurance as the only recourse for the buyer. Corporate sellers, by contrast, tend to approach risk allocation differently. Where they remain strategically tied to the business or are divesting as part of a carve-out, they are more willing to provide operational warranties and indemnities. They may also accept more bespoke risk allocation structures such as earn-outs, holdbacks or indemnity, particularly where business continuity and integration are critical to the buyer.

On the buy-side, private equity funds in India mirror global practice by negotiating aggressively. They push for comprehensive diligence, robust warranties, tax indemnities and tailored protections against regulatory non-compliance or legacy disputes. Corporates, especially strategic buyers, may take a more balanced approach – accepting certain business risks identified in diligence in exchange for commercial synergies or strategic objectives.

In Indian private equity exits, warranty and indemnity exposure is deliberately narrow, with minimal tail liability. In control deals, funds rarely give business warranties, instead relying on W&I insurance for operational coverage and limiting their responsibility to fundamental warranties and specific indemnities for identified risks. In minority deals, business warranties are typically provided by promoters/founders. Where promoters/founders provide coverage, buyers often use W&I to bridge gaps.

Protections are always heavily negotiated and time-limited.

• Fundamental warranties are generally tied to the fund’s life.
• Business warranties, where agreed, last 12 to 24 months.
• Tax indemnities, particularly for withholding tax exposures where the buyer may be treated as a representative assessee, survive four to seven years.

Fraud liability is uncapped.

Disclosure is central, with sellers qualifying warranties through disclosure letters, audited accounts and vendor due diligence. Sellers push for general data-room disclosures, but buyers typically resist unless W&I is in place.

As set out in 6.9 Warranty and Indemnity Protection, W&I insurance is now widely used in larger Indian private equity exits to address the limited warranty package typically offered by funds.

Escrows or holdbacks are also seen, though not universally applied, and usually limited to specifically identified risks rather than general warranty coverage. Where the seller is a non-resident, these arrangements are subject to exchange control rules and accordingly the amount cannot exceed 25% of the consideration and must be released within 18 months from execution of the share purchase agreement.

In certain cases, buyers also seek additional comfort by requiring funds to provide equity commitment letters at the time of exit, reinforcing certainty around indemnity payment obligations.

Litigation in private equity transactions in India is relatively rare, with most disputes resolved through private settlement. Recently, however, there has been a rise in cases concerning governance and promoter conduct. Warranty and indemnity claims against funds themselves remain uncommon, owing to the limited scope of warranties typically provided and the increasing use of W&I insurance.

Public-to-private deals backed by private equity sponsors are rare in India, mainly because the SEBI delisting regime is procedurally complex and heavily tilted towards protecting minority shareholders. The process requires shareholder approval, reverse book-building, compliance with strict pricing norms, and achieving a 90% ownership threshold post-offer, making execution uncertain and time-consuming. Delistings also often fail due to elevated exit pricing expectations from minority shareholders under the reverse book-building process. Even after navigating the entire process, there is no certainty that the remaining minority shareholders can be successfully taken out.

The role of the target company and its board is largely facilitative, approving the delisting proposal, applying to stock exchanges, certifying compliance, and recommending the offer to shareholders. Shareholder approval is particularly difficult to secure because, under SEBI rules, the delisting proposal requires public shareholder approval with votes in favour being at least twice the number of votes against.

“Relationship agreements” or bespoke transaction agreements between bidder and target are uncommon. The delisting process is governed almost entirely by statutory mechanisms under SEBI rules, leaving limited scope for private contracting between the bidder and the listed company.

Recent SEBI reforms, such as introducing a fixed-price delisting option (with a 15% premium) and lowering counter-offer thresholds, are intended to improve deal certainty (see delisting reforms set out in 2.1 Impact of Legal Developments on Funds and Transactions). However, these measures have yet to significantly increase the use of private equity-led public-to-privates.

In India, acquisitions of shares or voting rights in listed companies trigger disclosure obligations under multiple regimes, particularly the following:

• the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (the “Takeover Regulations”);
• the SEBI (Prohibition of Insider Trading) Regulations 2015 (the “PIT Regulations”); and
• the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (the “LODR Regulations”).

Under the Takeover Regulations, any investor (including a private equity bidder together with persons acting in concert (PACs)) acquiring 5% or more of shares or voting rights is required to disclose the holding to the company and stock exchanges within two working days of such acquisition. Thereafter, any change of 2% or more in such holdings (whether acquisition or disposal) also requires disclosure. Creation, invocation or release of pledges and encumbrances is treated as an acquisition or disposal and must be reported. Promoters have additional obligations to disclose encumbrances within seven working days, along with an annual confirmation of all encumbrances.

Separately, the PIT Regulations require promoters, members of the promoter group, designated persons and directors to make an initial disclosure of their shareholding in the company upon appointment or classification as such. Thereafter, on a continuous basis, they must disclose any trades if the value of the securities traded over a calendar quarter exceeds INR10 lakh (approximately USD12,000). These disclosures must be made to the company within two working days, which in turn informs the stock exchanges. Companies also maintain internal reporting frameworks to monitor compliance. 

The LODR Regulations also require listed companies to disclose agreements entered into by shareholders, promoters, promoter group entities, among themselves or with the listed entity or with a third party, which, either directly or indirectly or potentially or whose purpose and effect is to, impact the management or control of the listed entity or impose any restriction or create any liability upon the listed entity, which are often relevant where PE investors acquire significant minority stakes with governance rights.

Takeover Regulations require an acquirer (alone or together with PACs) that acquires 25% or more of the voting rights or control (direct or indirect) in a listed company to make an open offer to all the shareholders (excluding the acquirer, PACs and parties to the triggering agreement) for at least 26% of the company’s shares. Further, if an acquirer (along with PACs) already holds 25% or more but remains below the maximum permissible non-public shareholding (currently 75%), any additional acquisition exceeding 5% of voting rights in a financial year will also trigger a mandatory open offer.

The Takeover Regulations apply an expansive concept of “persons acting in concert”, meaning that shareholdings of related entities are aggregated. This is particularly relevant for private equity sponsors, since affiliated or related funds managed by the same general partner may be treated as PACs, even if they invest through separate vehicles. Portfolio companies may also fall within PAC attribution if there are co-ordinated arrangements with the acquirer or its affiliates.

For private equity-backed bidders, this makes it essential to carefully assess acquisition structures, fund governance and any parallel or consortium investments, as attribution rules can significantly impact thresholds.

Certain transactions are exempt from open offer obligations, such as inter-se transfers among promoters, group restructurings, or acquisitions under approved schemes of arrangement.

Cash is by far the most common form of consideration in tender offers, particularly in private equity transactions and open offers under the Takeover Regulations. Share swaps or mixed consideration structures are not common given valuation challenges, regulatory approvals and foreign exchange restrictions.

Minimum pricing rules apply to tender offers under the Takeover Regulations. In case of a direct acquisition of frequently traded shares of a listed company, the offer price cannot be less than the highest of:

• the highest negotiated price per share under the agreement that triggered the open offer obligation;
• the highest price paid or payable for any acquisition by the acquirer or its PACs in the 26 weeks preceding the public announcement;
• the volume-weighted average market price of the shares on the stock exchange with the highest trading volume, where the shares are frequently traded, for 60 trading days preceding the public announcement; and
• the volume-weighted average price paid or payable for acquisitions by the acquirer or its PACs in the 52 weeks preceding the public announcement.

For infrequently traded shares, the price is determined by the acquirer and the manager to the open offer, taking into account valuation parameters such as:

• book value;
• comparable trading multiples; and
• other customary metrics for valuing shares of such companies.

Takeover offers under the Takeover Regulations are heavily regulated, and bidders have very limited ability to impose conditions. These are generally restricted to statutory and regulatory approvals (such as CCI or sectoral approvals). A tender offer can also be made contingent on achieving a specific minimum level of acceptance from shareholders. However, commercial conditions (eg, material adverse effect clauses or due diligence completion) are not permissible in takeover offers. Further, it cannot be conditional on obtaining financing; instead, bidders must have firm financial arrangements in place and deposit the required amount into escrow, either in cash, by way of a bank guarantee or in other permitted forms upfront. This framework is designed to protect minority shareholders and ensure completion certainty.

Deal protection measures common in private M&A, such as break fees, force-the-vote provisions or non-solicitation clauses, are generally not available in listed company takeovers, given the prescriptive framework and minority shareholder protection focus. That said, in competitive situations, bidders may contract for limited match rights or exclusivity undertakings directly with the seller/promoters, though such arrangements remain subject to disclosure obligations and cannot override shareholder-level protections under law.

All listed companies are generally required to maintain a minimum public shareholding of 25%. If, after a tender offer, the public float falls below this threshold, the acquirer must either restore public shareholding to at least 25% within 12 months (for example, through secondary sales) or pursue delisting. Consequently, an acquirer seeking to obtain 100% ownership of a listed company will generally need to follow the delisting route, as outlined in 7.1 Public-to-Private.

If a private equity bidder does not seek or obtain 100% ownership of the target, additional governance rights are typically sought through shareholder agreements or articles of association. These may include board nomination rights and vetoes over key strategic decisions. The scope of such rights usually depends on the bidder’s shareholding.

Unlike some other jurisdictions, debt push-downs are not feasible in India. Even where the acquirer holds majority control, Indian company law prohibits financial assistance for acquisition of a company’s own shares. As a result, acquisition debt is generally raised and serviced outside the target, with post-acquisition refinancing, sell downs or dividend upstreaming used to support repayment.

India does not have a simple short-form squeeze-out on crossing a threshold. The main routes are as follows.

• Compulsory acquisition – Under the Companies Act 2013, a shareholder holding 90% or more of issued share capital (alone or with PACs) can initiate a squeeze-out of the remaining minority, subject to valuation and fairness conditions.
• Delisting route – If the bidder achieves 90% or more after a takeover offer, it can pursue delisting under SEBI regulations, extinguishing minority holdings once public shareholders tender. However, this does not guarantee a 100% squeeze out.
• Schemes of arrangement – Court/NCLT-approved mergers, demergers or capital reduction schemes are sometimes used to achieve full ownership, subject to shareholder and regulatory approvals.

In India, takeover offers are typically triggered pursuant to negotiated deals with promoters or significant shareholders, which are formalised through share purchase agreements prior to making public announcement for an open offer. It is not common to have irrevocable commitments to tender or vote in favour of the acquirer (where required) outside such agreements, as the Takeover Regulations require equal treatment of all shareholders. Any irrevocable commitment by principal shareholders could itself be viewed as a preferential arrangement and may trigger disclosure or regulatory implications.

It is not common for sellers to be given an “out” if a better offer emerges, once the definitive document is signed and the open offer is triggered. Their obligations to sell are binding, subject only to the terms and conditions of the agreement and regulatory approvals. However, public shareholders (other than the contracting promoters) remain free to tender if a competing offer is made.

Equity incentive arrangements are a standard feature of Indian private equity transactions and are central to aligning the interests of management and sponsors. Employee stock option plans (ESOPs) remain the most common mechanism, typically structured to vest over three to five years in tranches that reflect the anticipated investment horizon of the PE fund. Pools are usually in the range of 5–10% of the fully diluted shareholding, though the exact percentage varies by sector and stage of growth.

Alternatives include employee stock purchase plans and sweat equity, which give immediate ownership but are less frequently used due to their upfront dilutive effect. In contrast, phantom stock or stock appreciation rights (SARs) are increasingly gaining traction in sponsor-backed companies because they are non-dilutive and cash-settled. Importantly, under the Companies Act, promoters and directors holding more than 10% of a company’s equity (other than in start-ups) cannot receive ESOPs. To incentivise such senior leadership, funds and companies typically use alternative structures such as phantom stock, ratchets or exit-linked bonuses.

Management participation is usually implemented through structured equity incentive plans rather than preferential “sweet equity”. In buyouts, where funds rely heavily on professional managers, PE sponsors often put in place upside-sharing mechanisms linked to financial performance or exit valuations.

As set out in 8.1 Equity Incentivisation and Ownership, while ESOPs remain the cornerstone, SARs and phantom stock are increasingly used to provide equity-linked benefits without creating dilution. In some cases, participation is structured through convertible or partly paid instruments, which defer value until performance milestones are achieved or an exit event occurs. These instruments also give investors flexibility to claw back value if targets are missed.

Vesting is a standard feature of Indian equity incentive plans, ensuring retention and alignment over the life of the PE investment. ESOPs and SARs generally vest over three to five years, often with a one-year cliff followed by periodic vesting.

Leaver provisions distinguish between “good leavers” and “bad leavers”. Good leavers, being those departing due to retirement, disability, death or termination without cause, are usually entitled to retain vested equity or receive fair value. Bad leavers, such as those resigning early or dismissed for misconduct, typically forfeit unvested options and may have to sell vested shares back at nominal value.

Management shareholders are generally bound by restrictive covenants designed to protect the value of the sponsor’s investment. These include:

• exclusivity obligations;
• non-compete undertakings (usually during employment and for one to three years post-exit);
• non-solicitation of employees and customers; and
• confidentiality obligations.

Non-disparagement clauses are also sometimes included.

While confidentiality and non-solicitation obligations are enforceable, Indian courts scrutinise post-employment non-competes and typically uphold them only if narrow in scope and duration. To maximise enforceability, these covenants are usually incorporated in the shareholders’ agreement and the employment contract.

Minority protections for management shareholders are modest compared to those afforded to financial investors. Management may be granted board representation and information rights and, in some cases where they hold a meaningful equity stake, limited vetoes. However, they seldom benefit from protections such as anti-dilution adjustments or liquidation preference.

Management also has little influence over the timing or structure of a private equity fund’s exit. Drag-along provisions are typically included to ensure the sponsor can execute a sale without obstruction. As a result, management’s economic upside is delivered primarily through equity incentives and performance-linked payouts, rather than through control rights.

ate equity sponsors in India typically secure a package of governance and information rights that balances operational autonomy for management with investor oversight. The scope depends on whether the fund holds control, but even minority investors obtain robust protections through shareholders’ agreements.

Board appointment rights are the primary lever of influence. Control investors usually nominate a majority of directors and may also reserve the right to appoint key executives. Minority sponsors often take one or two seats, with observer rights also common, particularly where there are co-investors.

Reserved matter protections usually cover the following:

• amendments to charter documents;
• changes to capital structure;
• significant acquisitions or divestitures;
• indebtedness;
• related-party transactions;
• incentive plans;
• budgets; and
• material litigation.

Information rights go beyond statutory entitlements. Investors typically receive the following:

• audited annual financials;
• quarterly management accounts;
• budgets and forecasts;
• board materials and minutes; and
• access to senior management.

They may also negotiate inspection and audit rights, particularly in the run-up to an exit or refinancing.

Under Indian corporate law, a company is recognised as a distinct legal entity, separate from its shareholders. Private equity investors, like all shareholders, benefit from limited liability and are not generally responsible for the acts of the company. Their obligations are limited to statutory disclosure requirements under applicable law, and they do not owe fiduciary duties to the company or its stakeholders.

Courts in India pierce the corporate veil only in exceptional circumstances. This doctrine is applied sparingly and typically only where there is compelling evidence of fraud, evasion of law, or misuse of the corporate form to perpetrate wrongdoing. Outside such rare cases, shareholders cannot be held liable for the actions or omissions of the company.

The most common forms of private equity exit in India remain sales to strategic buyers, secondary sales to other financial sponsors, and IPOs.

Other forms of exit include secondary market sell-downs and a nascent use of GP-led continuation vehicles. Classic dividend recapitalisations are uncommon in India, given regulatory and leverage constraints.

Certain contractual and statutory exit mechanisms exist but are less commonly exercised in practice. These include put options to promoters, which face restrictions under India’s foreign exchange regime and pricing rules for non-resident investors that limit the ability to guarantee returns, and buy-backs by the target, which are constrained by the Companies Act provisions on maximum buy-back size, permissible use of proceeds, and balance sheet tests.

Dual-track processes, where an IPO and trade sale are run in parallel, are seen in larger exits, and it is increasingly common for investors to undertake partial pre-IPO sell-downs before participating in an IPO. Triple-track processes, which add a recapitalisation option, are virtually unheard of. Private equity funds typically prefer full monetisation on exit, though management rollovers are common where continuity is important. Sponsor rollovers are unusual, though recent announcements by large global managers indicate that continuation-style structures are beginning to appear in India.

Drag and tag rights are a standard feature of Indian private equity shareholders’ agreements. Drag thresholds are typically set at a majority or supermajority level, often around two-thirds of investor holdings, while tag rights are generally available to all minority shareholders on a pro rata basis or on a full tag basis if there is a change of control. Institutional co-investors usually benefit from the same protections as the lead fund, whereas management shareholders tend to have strong tag rights but rarely enjoy drag rights, and their participation is sometimes subject to priority allocations in favour of institutional investors.

For IPO exits, private equity funds and other selling shareholders typically monetise their holdings through an offer-for-sale (OFS) at listing and/or post-IPO block trades. Under Indian regulations, non-promoter pre-IPO shareholders (including most PE funds) are subject to a statutory six-month lock-in from allotment for any remaining pre-issue shares. Additionally, bookrunners often require contractual lock-ups of 90–180 days to support post-IPO price stability.

Relationship agreements are not standard in Indian IPOs. Most investor rights fall away on listing to comply with SEBI’s listing regulations except for board representation for investors, subject to approval by shareholders through a special resolution after listing. However, SEBI permits certain shareholder arrangements (where issuers are not a party), such as rights of first refusal, to continue post-IPO.

A key feature in India is the potential classification of PE funds as “promoters” if their shareholding and involvement cross certain thresholds. In such cases, the lock-in period increases significantly – typically to 18 months for at least 20% of the post-issue paid-up capital (the Minimum Promoter’s Contribution) and six months for any excess. If the majority of IPO proceeds are used for capital expenditure, these lock-ins may extend to 36 months and 12 months, respectively. The precise threshold for promoter classification is not expressly set out in the regulations. However, a 10% shareholding along with certain rights or a 25% shareholding is treated as a practical benchmark by the stock exchanges.

Other notable aspects of PE-led IPO exits in India include anchor allocations, pre-IPO placements, the minimum public shareholding requirement and the use of post-lock-up block trades as practical exit tools. Under the Indian legislation, the selling shareholders are also required to share the cost of the IPO in proportion to the number of shares being offered by them.