The ambition from Indian mid-sized companies for large debt-fuelled acquisitions abroad was dealt a major setback after the unravelling of a $2.5 billion bid by India's Apollo Tyres Ltd to buy Cooper Tire & Rubber Co.
While some bankers said Apollo's bid for Cooper was risky due to the larger size of the target, the outcome will add to scepticism about the ability of Indian family-run firms to execute large cross-border deals despite their need to search for growth abroad.
"There wasn't a gung-ho attitude toward outbound M&A anyway in the last couple of years in India and the Apollo-Cooper episode will further slow down the process," said the head of M&A at a European bank in Mumbai.
"Indian companies haven't had much success in their outbound drive and after this, especially the mid-sized names, would be a lot more cautious about the kind of assets they buy, the kind of leverage they take."
India Inc's overseas ambitions rose along with China's roughly 10 years ago as the two countries courted growth outside their own economies.
Corporate India has won some successful overseas deals, including Tata Motors' acquisition of Jaguar Land Rover from Ford Motor in 2008 for $2.3 billion.
But for the most part, India has struggled to show that its companies are equipped with the savvy, the experience and the determination needed to win cross-border deals and to manage them well.
India Inc has launched $117 billion worth of outbound M&A in the past decade, but that pales in comparison to China's $390 billion worth of outbound deals announced in the same period, according to Thomson Reuters data.
Unlike China, where state-owned enterprises have dominated deal flows, in India the private sector companies, especially small and medium-sized ones, have been at the forefront of deal making with deals often fuelled by large amounts of debt.
GVK Power & Infrastructure in 2011 agreed to pay $1.26 billion for a majority stake in three Australian coal mines and a port and rail project owned by Hancock Group, but has seen the debt denting its balance sheet and its shares.
Other mid-sized family-owned Indian enterprises such as GMR