India has been experiencing dynamic trends in the energy and infrastructure M&A during the past decade − driven by a confluence of factors, including technological advancements, evolving regulatory framework, climate change and transformative geopolitical landscapes. The heightened urgency of the climate crisis has accelerated calls to action for the energy industry to shift from traditional fossil-fuel-based systems (eg, oil, natural gas, and coal) to renewable energy sources.

In its commitment to achieve net zero by 2070, India is currently laying the foundations for a new energy and infrastructure system while inviting global participation. This shift has led to increased inbound M&A activity in the energy and infrastructure sectors in India.

Further, sectoral growth in the manufacturing and automotive sectors can be mainly attributed to India’s strategic initiatives to augment its domestic capabilities, including the “Make in India” campaign and the significant liberalisation of foreign direct investment (FDI) in these sectors by increasing the automatic route threshold. India has also pledged an investment of USD5 billion in the clean energy value chain (including renewable energy, green hydrogen and electric vehicle markets) at the Indo-Pacific Economic Framework for Prosperity (IPEF) Clean Economy Investor Forum meeting.

Against this backdrop, deal-making activity has considerably improved in 2024−25 as compared to 2022−23 and 2023−24, with M&A and FDI activity in the energy and infrastructure sectors occupying a significant percentage of the overall deal volume. According to data from the Indian government, the FDI inflow is estimated at USD81 billion in 2024−25 – marking a 14% increase from the previous year – with the major share of investments in the manufacturing sector, energy and its subsectors, and technology.

These deals, however, are largely strategic and subsector-focused rather than target-based portfolio build-up. Some of the key driving factors that have led to sector-based M&A activity have been energy security, decarbonisation goals, and electrification, as well as the development of digital infrastructure and manufacturing capabilities.

Private debt − a potential structuring option

Private debt is a relatively new trend in alternative investments and refers to the provision of debt financing to companies by a fund or a non-banking entity not ordinarily in the business of capital lending (private equity firms, hedge funds, or other institutional investors), rather than by traditional banks. These loans are typically provided to private companies or projects that may not have access to public markets. Private credit can include direct lending, distressed debt, or mezzanine financing, and it often offers higher returns compared to traditional bank loans or bonds.

Private debt, as a financing option, expanded rapidly after the “global financial crisis” when the financial institutions exited from leveraged lending and concentrated their corporate operations on larger clients. The funding gap created in the market was filled by private debt funds.

The debt provided in such structures is in the form of debentures or other debt-based instruments, which are often secured through a pledge of shares or assets of the company and/or its promoters. The redemption premium of the debt-based instruments that are available to the lenders may be linked to identified performance indicators or targets (eg, achievement of financial targets by the company). The benefits of availing private debt are:

• it provides lenders with the upside protection of equity (ie, conversion and appreciation characteristics built in the instrument) and the downside protection of debt (by way of a pledge or security); and
• immediate availability of financial assistance to companies without any dilution, at times when retention of control may be essential.

In recent times, private debt has emerged as one of the most viable structuring options adopted by companies and is being explored by seasoned investors of varying scale. In the context of the energy and infrastructure sectors, which are capital-intensive with high gestation periods, private credit provides the investors with more control over risk management, as repayment schedules and financing terms can be appropriately tailored based on the investor’s risk appetite and the company or the asset’s risk profile. India’s robust insolvency framework has also contributed towards investor confidence and the growth of private credit.

As of March 2025, India’s private credit market is estimated to have assets under management of USD25 billion to USD30 billion, representing about 0.6% of India’s GDP (according to S&P Global) and is expected to reach USD60 billion by 2028 (according to Business Line). Thus, funding of energy and infrastructure sectors through private debt funding will continue to grow in India, with a key focus on the security package, redemption events and favourable coupon rates available to the investors.

Infrastructure investment trusts

Recently, India has witnessed a tremendous growth in infrastructure investment trusts (“InvITs”) as an investment vehicle in the infrastructure sector. In 2025, there were 27 InvITs registered in India, with a total assets under management (AUM) of USD73 billion. Projections indicate that the total AUM could reach USD258 billion by 2030. In view of the expected decline in interest rates, the introduction of tax incentives, and a more flexibleinvestment regime, fund mobilisation by the InvITs looks increasingly promising for large-scale infrastructure projects (according to the Economic Times and Knight-Frank India).

With an increase in e-commerce, digitalisation and data localisation in India, it is expected that various warehouse-focused and data-centre-focused InvITs may be constituted, especially after the recent classification of data centres as infrastructure. As the portfolio of InvITs diversifies into non-traditional asset classes, potential for the green and sustainable urban expansion of India’s infrastructure is unlocked in the process.

Warranty and indemnity insurance

India has witnessed an increasing trend, particularly in energy and infrastructure deals, whereby sellers or exiting investors either seek non-recourse or limited recourse deal – ie, post-acquisition, the buyer has limited recourse to the seller. In this context, warranty and indemnity (“W&I”) insurance has emerged as a favourable option in the Indian M&A framework.

The success of M&A deal-making backed by W&I insurance is evidenced by its growing acceptance in India, especially given that it allows the seller to effectively cap its potential liabilities after the deal closes. Such transaction mechanism is advantageous in situations where:

• the sellers are venture capitalists or private equity funds intending a clean exit post-closing; or
• the seller is a limited-life entity whose remaining term of existence is shorter than the potential claim period for the withholding tax risk.

The increase in W&I insurance is likely to continue in response to several factors, including:

• the growing enterprise value of deals across the energy and infrastructure sectors;
• the entry of multiple players in the underwriting space and their ability to provide W&I insurance across sectors;
• the growing risk appetite of insurers; and
• an increasing number of sellers that are limited-life funds.

Joint ventures as a corporate vehicle for exploration

As opposed to development of renewable energy projects through traditional sources such as solar and wind, the impetus on green hydrogen, green ammonia and nuclear energy has driven conventional fuel-based companies to explore the potential that these newer sources of renewable energy present. Energy companies are diversifying their portfolio by entering into strategic partnerships for the development of green hydrogen projects and electrolysers. Examples include:

• the proposed joint venture agreement between Bharat Petroleum Corporation Limited and Sembcorp Industries for the development of green hydrogen projects;
• the joint venture between Adani Enterprises Limited (through its wholly-owned subsidiary in Singapore) and Singapore-based Kowa Holdings Asia Pte Ltd for sales and marketing of green hydrogen and its derivatives, to be manufactured in India under Adani New Industries Limited;
• an Indian joint venture between the US-based Air Products and the INOX Group for the development of a green hydrogen plant in Rajasthan;
• the joint venture between Indian Oil Corporation Limited, L&T and Renew Power Limited to develop green hydrogen projects; and
• a separate joint venture formed between Indian Oil Corporation Limited and L&T for the manufacture of electrolysers.

There have been some notable joint ventures for the development of smart metering projects, railway projects, and logistics as well.

Rise of renewable energy IPOs

For close to a decade now, renewable energy companies in India have attracted foreign private equity investors, institutional investors and other global funds – either in the form of platform deals or through strategic investments. With India’s commitment towards green energy transition, the renewables industry has evolved into a high-yielding sector with a long-term value trajectory reflected in relatively lower capital expenditure (particularly in the solar power sector) and consistent cash flows propelled by the ever-increasing energy demands.

In the Indian context (where public markets have been increasingly active with public listing), the renewable energy sector has recently has witnessed a considerable rise in IPOs with attractive valuations. The current pipeline for projected IPOs includes the green energy arms of prestigious state-owned companies such as ONGC Green, NHPC Renewable Energy and SJVN Green Energy, as well as SECI – all of which are expected to raise up to an estimated USD8 billion in next few years (according to Mergermarket). These IPOs are expected to involve significant participation from foreign institutional investors.

Continued private equity confidence

India’s supportive sectoral regulatory regime and growth-focused policies and incentives have resulted in the creation of large-scale assets across the energy and infrastructure subsectors that are bankable. Despite the downturn in the global economy, inflationary trends, and the overall decline in private equity/venture capital investments, the energy and infrastructure sectors (in particular, new and alternate energies, renewables, climate impact, and roads and highways) have continued to attract large investments from private equity funds.

One such example is Brookfield Asset Management’s acquisition of American Tower Corporation’s Indian operations for estimated USD2.5 billion. Along with Brookfield, other global private equity majors such as KKR, Blackstone and Actis have identified India’s energy and infrastructure sectors as a key market for allocation of capital in the next few years.

Change in control – structuring consideration

Infrastructure projects and utility-scale energy projects in India are developed through PPP mode granted in the form of agreements known as “concessions” − ie, a right conceded to a private partner for the provision of a public asset and service for a designated purpose over a specified period on the basis of market-determined revenue streams that allow a commercial return on investment. Typically, concession agreements contain change in control (CIC) restrictions (direct or indirect) for a certain specified timeline − usually linked to the commissioning or operational commencement date of the asset − across various subsectors. These restrictions either completely disallow the concessionaire (ie, the entity developing the project) from effecting any change in its majority shareholding or its control or else they permit such change only with the prior consent of the relevant authority.

Considering the volume of energy and infrastructure M&A transactions in recent times, the CIC restrictions have been a key consideration for transaction structuring – in particular, for projects which are under construction. The government authorities are usually not amenable to grant their consent to transactions that effect or purport to effect a change in shareholding or control. Therefore, transactions are being structured using a combination of equity and debt instruments to remain in compliance with change in shareholding or control restrictions and to achieve the desired outcome of the transaction once these restrictions come to an end.

Increased focus on forensics and anti-bribery and corruption

India’s energy and infrastructure sectors have attracted tremendous inbound investment in recent times from private equity funds, institutional investors, multilaterals and pension funds. With the increase in M&A activity in these sectors, the sophistication of investors and their risk profiles have witnessed a marked shift. Notably, in the context of foreign investors who are within the ambit of the Foreign Corrupt Practices Act 1977 and the Bribery Act 2010, the findings of the forensic and anti-bribery and corruption (ABC) diligences have emerged as one of the drivers of investment decisions.

ABC risks do not necessarily relate only to the jurisdictions in which the parties to the transaction operate themselves but can lead to potential exposure in other jurisdictions. Considering the impact of ABC exposure on the valuations of a company and the return on investment, investors are increasingly focusing on the regulatory regime governing the target’s jurisdiction with regard to ABC, the best practices in such jurisdiction and the powers of the law enforcement agencies in order to clearly assess the risks of any potential ABC exposure faced by the target.

Impact of ESG factors

With public policy increasingly shaped by growing concerns about climate, sustainability, diversity, inclusion and equity, ESG factors are redefining the assessment of value and risksin business. Investors are increasingly applying these non-financial factors to assess material risks and growth opportunities while devising their investment strategies and diversifying their portfolio.

Owing to the nature of energy and infrastructure sectors, where each project may have a potential impact on the environment, assessment of environmental compliance has customarily been part of the investor’s checklist. However, ESG presents a more holistic set of parameters, requiring a broader understanding of the risks beyond the immediate financial or regulatory parameters.

Various countries have introduced regulations and reporting frameworks around ESG and sustainability reporting, including India. The Securities and Exchange Board of India (India’s capital markets regulator) introduced a sustainability reporting framework called the “Business Responsibility and Sustainability Report” (BRSR) in 2021. The BRSR reporting framework is applicable to the top 1,000 listed companies (by market capitalisation), which include conglomerates that are in “hard-to-abate” sectors such as steel, conventional power, and oil and gas. The 2024−25 central budget also introduced the “climate finance taxonomy” intended to boost capital availability for climate-resilient infrastructure projects.

In high-value M&As with cross-border implications, the investor sensitivity towards ESG awareness in the target’s jurisdiction is gradually increasing − especially in investments from jurisdictions with some form of mandatory ESG reporting, such as the USA, the UK and the EU.

Data protection

Amid increased stakeholder consultations seeking to amend the existing data protection regime in India, the Digital Personal Data Protection Act 2023 (the “DPDP Act”) was enacted in August 2023. The scope of the legislation has been expanded from “sensitive personal data” (as protected under the erstwhile Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011) to “personal data”. Therefore, any data that is related to or provides any personal identification details of a person must be protected under the umbrella of the DPDP Act.

The DPDP Act prescribes compliances for companies handling such data and penalties that are significantly higher, ranging up to INR2.5 billion. On 13 November 2025, the Ministry of Electronics and Information Technology notified the Digital Personal Data Protection Rules 2025 (the “DPDP Rules”) to operationalise the DPDP Act. The DPDP Rules set out the operative standards, procedural requirements, and compliance safeguards that govern the collection, processing, storage and disposal of personal data.

Separately, the Digital India Act 2023 may also be enacted to replace the prevailing Information Technology Act 2000 in order to streamline the framework for technology and digitalisation regulations. This reform aims to address key concerns afflicting the current legal framework, including misinformation and cybersecurity.

Impact of sanctions

In recent times, geopolitical movements in the form of tariff wars and sanctions have re-drawn business considerations and have particularly impacted the oil and gas sectors, creating energy security concerns. While a tariff war has been waged by the USA, there has also been increasing pressure on India from global forums to cut off Russian oil imports owing to sanctions imposed on Russia as a result of the Russia−Ukraine war. Indian energy companies such as Nayara Energy (a major Indian refinery with Russian ownership) have been severely impacted by sanctions imposed by the EU, leading to significant drop in their exports. Another of the key monetary impacts has been the repatriation of dividends to Indian oil companies that have investments in Russian energy projects.

Bankability of energy and infrastructure projects

The Indian government has made various changes to achieve bankability in the energy and infrastructure sectors, as follows.

Renewable energy

The following measures have been introduced in the renewable energy sector.

i) Standard bidding guidelines

To streamline the bidding processes by tendering authorities, the Indian government has introduced various standard bidding guidelines (the “Bidding Guidelines”) based on the source of renewable energy and the underlying technology. The Bidding Guidelines aim to ensure bidding for renewable energy projects is conducted in a transparent manner. The continued evolution of these Bidding Guidelines has sought to address various issues in industry – compensation in cases of grid unavailability, termination compensation, payment security, etc – all of which impacted projects’ cash flows.

ii) Compensation for changes in law

Considering that utility-scale power purchase agreements do not in most instances set out a mechanism for determining compensation in the event of a change in law, power generators are required to approach the regulatory commissions for determination of such compensation. The Indian government has introduced the Electricity (Timely Recovery of Costs Due to Change in Law) Rules 2021, laying down the mechanism for tariff adjustment to mitigate the impact of a change in law by restoring the affected party to the same economic position as before the change in law.

iii) Late payment rules

Distribution companies in India have historically been debt-laden, with unreliable payment histories, and this continues to be the most critical risk in the energy sector. In order to overcome the hurdles of non-payment to power generators, transmission licensees and trading licensees, the Indian government notified the Late Payment Surcharge Rules 2022, placing a firm obligation on distribution companies to provide a payment security in the form of a letter of credit − failing which, power generators can then reduce the supply of power to the defaulting distribution companies for further resale. The Late Payment Surcharge Rules 2022 also provide a framework for calculating and levying late payment surcharges in the event that distribution companies default or incur a delay in their payment obligation.

iv) Must-run provisions

Although renewable energy projects in India have been granted “must-run status” (ie, duly commissioned projects cannot be directed to back down their generation, except owing to reasons of grid security), there have been instances across the Indian states whereby distribution companies or load despatch centres have issued frequent backdown instructions. In order to address this, the Indian government has notified the Electricity (Promotion of Generation of Electricity from Must-Run Power Plants) Rules 2021 to compensate renewable energy generators even in cases where the power purchase agreements do not specifically provide for relief in the event of grid backdown instructions.

Oil and gas

In April 2025, the Indian government implemented the Oilfields (Regulation and Development) Amendment Act 2025 (the “ORD Act”), introducing a unified petroleum lease regime. This also consolidated the regulation of exploration, production, infrastructure-sharing and energy-transition activities within a single legislation.

The ORD Act has expanded the definition of “mineral oils” to include unconventional hydrocarbons and, among other things, permits the development of renewable energy projects within oilfields. In alignment with this legislative reform, the Petroleum and Natural Gas Regulatory Board has operationalised − effective from 1 July 2024 − a uniform levelised gas transportation tariff across the national pipeline grid under the “One Nation, One Grid, One Tariff” initiative to promote equitable market access.

Roads and highways

In January 2024, the Indian government issued amendments to the model concession agreements for Build-Operate-Toll and Toll-Operate Transfer models of road projects. The amended agreements provide for termination payment and compensation for default payable by the National Highways Authority of India.

The termination compensation is payable even before the commercial operation date if 40% or more of the project has been physically constructed prior to the default causing termination of the concession agreement. The termination compensation will include direct costs and loss of toll revenue prior to the commercial operation date of the project.

Another significant amendment to the model concession agreements enables concessionaires to claim monetary compensation and seek extension of the concession period if competing roads or additional tollways are constructed during the concession period.

Outlook

India’s focus on its green energy transition in order to achieve its COP26 targets (ie, 50% of its energy demands to be met through renewable sources by 2030) – together with the country’s continued focus on infrastructure subsectors, with robust underlying policies and a liberalised foreign investment regime – present a unique growth potential. In fact, the regulatory regime (both financial and subsectoral) indicates a shift towards an enabling framework that encourages investments and boosts investor confidence in the energy and infrastructure sectors. If the current trends are a marker, these sectors will continue to attract greater capital relative to other sectors in the coming years, as investments will be required at every stage of the life cycle of various projects and the value chain associated with them.