Bridging the Gulf: Middle Eastern investment in India continues to build

Data InsightDealspeak 3 April

Bridging the Gulf: Middle Eastern investment in India continues to build

India and the Middle East have long enjoyed close ties thanks to their geographic and cultural proximity. Not only that, but since the lifting of pandemic-induced restrictions, traveller numbers between the two have taken off.

In recent years, this bond has strengthened further, with India consistently among the top-three investment destinations for Middle Eastern funds, according to Dealogic data. The country has been the first choice for Arabian investors for three of the past five years, including 2022.

Although deal value dropped to USD 658m in 2021, hampered by the effects of the pandemic and lockdowns, activity surged back last year, with the deal count hitting its highest level since 2009, as 20 transactions were closed for a total of USD 3.9bn, per Dealogic data.

Audience appeal

The pandemic provided a huge boost to technology and tech-based businesses in India, as it expedited the move to digitalisation and the building out of companies’ online presence.

This strengthening of India’s technological muscle, in conjunction with the country’s huge target audience, is a major draw for foreign investors particularly those in the cash-rich Middle East, opines Supreet Raju, co-founder of Dubai-based food metaverse start-up OneRare.

Growing interest from oil-rich investors has seen the deal count in India rise sharply across the board, rather than one-off headline-making acquisitions.

Investment since 2020 has been led by the United Arab Emirates (UAE), Saudi Arabia and Israel, with half of the principal deals in 2022 driven by financial sponsors. Utility & energy (three deals), metal & steel (one), and finance (two) have proved popular investment targets, according to Dealogic data, with the computer & electronics sector out in front with four tie-ups.

This surge in activity reflects positively on Indian companies’ ability to forge partnerships with Middle Eastern interests.

Utkarsh Sinha, a managing director at Bexley Advisors, says there is a stickiness and predictability associated with Middle Eastern capital. While it may initially appear difficult to raise capital from some limited partners, Indian companies are finding success developing and nurturing relationships, building trust ahead of potential capital deployment.

Future is bright

Middle Eastern investment in India has proved diverse, as evidenced by the broad sector appeal of target companies.

In February 2021, Wavelength Pharmaceuticals, an Israel-based developer and manufacturer of active pharmaceutical ingredients (APIs), acquired a majority holding in Telangana-headquartered Vanamali Organics, a drug manufacturer. In April 2022, Abu Dhabi Investment Authority shelled out for a 3% stake in Intas Pharma, a multinational pharma player, from Temasek Holdings. In September 2022, Saudi Arabia-based Petromin Group swooped for a majority share of Bengaluru-based auto-tech firm Ecarobaar Technologies. In January, Dubai-based fintech firm Xare acquired Bengaluru-centred financial services start-up Rive for an undisclosed amount.

“Middle East capital is welcome the world over, and therefore investors have the discretionary power to decide which region they want to invest in, with the highest probability of returns, the most preferable risk profile and the highest ability for capital repatriation,” says Sinha. He adds that India has done well on all these parameters: “we have demonstrated that there is a growth story, little risk to investing here.”

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