India Inc. focuses on core areas with exits, buyouts

Many companies which diversified into unrelated areas are taking the exit route

- Priyamvada C. & Ranjani Raghavan

Stick to your knitting. That's the latest motto for many large Indian companies as they go for demergers and selloffs, while some of them snap up businesses in their primary focus areas. The common objective: unlock shareholder value, reduce debt, and strengthen balance sheets.

In recent months, Hindustan Unilever, Bharti Enterprises, Adani Enterprises, Larsen & Toubro and the Tata Group, among many others, have sold off non-core assets to focus on their primary competencies. It is a trend that industry executives expect will accelerate going forward due to favourable market conditions.

But why now? Devarajan Nambakam, co-head of India investment banking at Goldman Sachs, said evolving market dynamics, including interest rates remaining high and a desire to unlock value from legacy businesses, is the key reason. "This is likely to continue in 2025 as companies recalibrate their portfolios to navigate a rapidly changing economic environment and prioritize long-term growth opportunities," he added.

According to Pramod Kumar, chief executive officer and head of investment banking of Barclays India, these deals are happening because of rising shareholder expectations-both institutional and promoters-and growing professionalisation of management. "Competitive intensity in businesses has increased and there is a greater need to focus management bandwidth on core strengths to remain competitive," Kumar said. "And last but not the least, the valuations are attractive today and there could not be a better time for monetization".

To be sure, companies tend to move away from the core to diversify their risks, and then move their focus back to the core when market conditions promise value unlocking for shareholders, according to experts.