Mumbai: From Walmart to Schneider Electric and Unilever on the one side and TPG Capital or KKR on the other,a tide of global capital is flooding into India from strategic investors to financial sponsors and consequently changing the pecking order of mega M&A sweepstakes in the prized market of Asia.For the first time in two decades, India has been getting more foreign investment than its neighbour China. In 2018, India saw more than $38 billion of inbound deals compared with China’s $32 billion, buoyed by stable fundamentals, a bankruptcy code and fresh opportunities in sunrise sectors.India’s foreign direct investment FDI ) was the highest ever with 235 deals amounting to $37.76 billion this calendar year, according to data from Dealogic, a global M&A and capital markets data provider, beating China, which has historically been the favourite for emerging market bets. China’s trade standoff with the US is seen as a major reason for the slowdown.“India has had a busy M&A calendar in 2018 and we will continue to see good traction in inbound M&As,” said Kalpana Morparia, chief executive for South and Southeast Asia at JP Morgan Chase & Co.“Given India’s demographics, the ecommercestory, the way India has leapfrogged the several stages oftechnologicalevolution,we expecta lot of activity in the technology and financial services space going forward.”Global investors typically focus on India despite short-term uncertainty over the political climate, be it state or federal elections, said Sonjoy Chatterjee, chairman, Goldman Sachs in India.“The macro overlay is that conditions are stable when you look at the big barometers, whether it be inflation, fiscal deficit or growth,” he said. “Also, the current account deficit has moved around due to oil and the currency but seems to be settling back.”Bankers from both these Wall Street bellwethers were involved in the biggest transaction of the year — Walmart’s $16 billion buyout of Flipkart. This may be a dominant theme in the foreseeable future asthe technology-driven consumer retail and financial services spaces are expected to see substantial M&A activity going ahead.However, that will also depend on how the latest changes in the FDI policy on ecommerce play out.Inbound interest will remain strong as India continues to be a critical growth market with its billion plus demographic advantage for investors from the US as well as China. Most expect the competition among Alibaba, Tencent and the FAANG ( Facebook , Apple, Amazon, Netflix, Google ) tech giants from Silicon Valley to intensify.Apart from ecommerce, another reason for inbound FDI was asset divestment, stemming from the new bankruptcy framework. Some of the crown jewels of Indian manufacturing, especially in steel, have been put on the block. As a result, foreign investors with deep pockets are deploying funds. In the past two years since theInsolvency and Bankruptcy Code (IBC) has been introduced, around 9,000 cases have come up for redressal, media reports show.Of this, around a fourth were resolved before entering bankruptcy court, leading to a liquidity release of around `1.2 lakh crore, media reports show. This is where bankers see a huge opportunity — helping promoters seek investment from strategic and financial sponsors before a company is admitted for liquidation.“The bigger opportunity I think is pre-IBC,” said Chandresh Ruparel, managing director, Rothschild & Co. “If you were to look at companies that are facing distress and are about to be admitted to IBC, that is the area of great activity. It is either the promoter that is looking at some sort of financing to stay out of IBC, you can look at the typical ARCs (asset reconstruction companies) or traditional distress funds to come in at this point.”When capital is scarce, it plays to the strengths of special situation specialists, many of which have set up shop either on their own likeBrookfield, or in partnership with a local partner such as Aion or Bain Capital. With banks and other traditional lenders staying away, this has presented a big opportunity for structured credit in terms of buying out distressed loans and real estate financing.“The need for capital for certain sectors in India is very large,” said Amit Dixit, senior MD, Blackstone Private Equity. “Most of this capital wouldn’t go in as common equity in a company but as structured credit or some other structured arrangement.”Three years back, when local banks were active, the overseas ones found it difficult to be on top of the collateral structure. Those roles are fast reversing.Traditional private equity players have also tweaked their growth-investment thesis to hew closer to their original credentials as takeover or buyout specialists, aiding industry consolidation such as that playing out in healthcare.KKR-backed Radiant or TPGbacked Manipal are mopping up scattered, subscale assets to bulk up and take on global giants such as Malaysia’s IHH Healthcare , which scooped up the biggest Indian hospital chain Fortis earlier this year.However, IHH’s plan to take a majority stake may have hit a roadblock thanks to a mid-December Supreme Court verdict.“We love buying companies that are complex or misunderstood by the market,” KKR’s Henry Kravis told ET in a recent interaction. “We were trying to do a lot of minority deals very early on without having much say in them. They turned out to be mediocre. We realised we needed to either have controlling positions or significant minority to be able to drive changes.”To keep the momentum going, corporate captains and M&A dealmakers believe strengthening governance and an optimal capital structure need to be sustained.Corporate families are looking to optimise portfolios and capital allocation for the India of the future which will be about scale and innovation.The overall macro environment in the last three years has helped this shift but delayed resolution of headline cases such as Essar Steel, which drag on in the courts, may again spoil the party as India heads toward a national election.