Majority of companies in India plan to undertake divestments in the next two years, according to a report by consulting firm EY.
According to the report, titled 'India Divestment Study', 81 per cent of the companies surveyed expect to divest in the next two years, while 67 per cent expect large-scale transformational divestments in the next 12 months.
Evolving customer preferences, macro-economic uncertainties, technological changes, shareholder pressure and geopolitical instability are some of the key factors that are driving companies to consider divestments, the report added.
The study is based on responses from over 40 organisations in India across sectors to gauge the success factors, challenges, collaboration landscape and growth areas for divestments in India.
"One of the major reasons why corporates are looking to divest is that they now want to focus on the core. As there is a finite pool of capital, corporates are looking to divest the under-performing businesses and re-invest the proceeds into their core business," said Naveen Tiwari, partner and head (carve-out and integration), EY India.
According to the study, companies today are broadly better at identifying assets that should be divested, but are increasingly slower in launching the process. According to the survey, 63 per cent of the companies said they held on to assets too long.
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Further, the report said 65 per cent of the surveyed companies used the proceeds from their last divestment to invest in their core business, with 56 per cent stating that the proceeds were used to fund investments in new products, markets and geographies.
The report also highlighted that analytics can help companies create value pre-sale. Sixty-five per cent of sellers said advanced analytics would create even more value for them if it was used during buyer negotiation, such as highlighting growth opportunities from the buyers' perspective.