NEW DELHI: The Indian automotive industry saw sustained deal activity in the first quarter of 2024 (January to March) albeit with declined ticket sizes. There were overall 24 deals valued at USD 357 million and 49 per cent decline in values over Q4 2023, propelled by a broader market slowdown and global inflationary trends and reflecting no change in deal volumes compared to Q4 2023. In the mergers and acquisitions space, there were six 6 deals valuing USD 172 mn. While the M&A activity witnessed an 11 per cent increase in values and a 33 per cent decrease in volumes this quarter, the PE activity saw a decline of almost 66 per cent in terms of values despite a 20 per cent increase in deal volumes.
The M&A activity within the automotive industry has remained subdued since 2023, in line with the cautious outlook on global M&A activity, an outcome of expected global inflation and geopolitical risks. This quarter witnessed six M&A deals, out of which three were domestic consolidations and the other three were inbound consolidations. The inbound M&A deals made up for USD 150 million of foreign investment from the automotive industry and were able to sustain the M&A momentum this quarter, leading to 11 per cent quarter-on quarter increase in deal value, finds the Grant Thornton Automotive Dealtracker 2024. Key sub-sectors, which consistently attracted investor interest, include electric vehicles, mobility as a service and auto-components.
Private equity activity comprised 18 deals valuing USD 185 mn. Except for two deals with values over USD 50 million, the market is dominated by a larger number of smaller value transactions. The smaller deal size indicates a strategic shift in more, but smaller bolt-on-acquisitions in early-stage investments, as opposed to few large-scale transactions.
Additionally, the broader market slowdown in February 2024 contributed to lower deal values. Traditional auto-component companies are expected to engage in acquisitions to enhance their EV capabilities.
Similarly, the PE trends signal the industry’s focus towards electrification, digital transformation and sustainability. The strategic stake acquisitions, such as Creador’s investment in Hinduja Tech, underscores a focused approach toward enhancing R&D and expanding global footprints in sustainable mobility.
The latest edition of Grant Thornton’s Automotive Dealtracker 2024 highlights the Indian automotive industry’s resilience amidst global challenges in the first quarter (Q1) ended March 2024. As the Indian automotive industry continues its path to sustained recovery against the backdrop of global macroeconomic challenges and a broader market slowdown, the sector has witnessed a trend of selective investments, characterised by sustained deal volumes amidst decline in deal values over the last quarter. This suggests, according to GT insight, that targeted, bolt on acquisitions and early-stage investments are influenced by the industry’s focus on EVs, mobility services and technological integration.
Electric vehicles and mobility-as-a-service are two key areas of investor interest, with both sub-sectors attracting notable attention, reflecting the global trend toward sustainable transportation and service-focused automotive models. Mobility as a service and EV sub-sectors led both deal volumes as well as values with 19 deals valuing USD 259 mn, with a focus on R&D and the development of sustainable mobility solutions.
Despite the drop in overall deals, investments in EVs and mobility services remain strong.
Strategic partnerships and PE investments demonstrate a focus on global networks and technology, with the aim of fostering sustainability and growth. The industry’s engagement with both M&A and PE investments points to a strategic recalibration, aiming to leverage global partnerships, technological advancements, and market opportunities to navigate the evolving automotive landscape.
The industry is prioritizing research and development and new technologies to align with the shift towards sustainable and connected vehicles, driving consolidation for synergies and value creation. Partnerships and strategic alliances, such as between TVS Mobility and Mitsubishi Corporation which acquired around 32 per cent stake in TVS Mobility’s new subsidiary, TVS Vehicle Mobility Solution (TVS VMS), with an investment of USD 36 million, indicating confidence in the growth potential of TVS’s dealership business in India. The partnership is set to transform TVS Mobility’s dealership business, enhancing service offerings across its automotive solutions, reflecting a shift towards digital and comprehensive vehicle mobility services.
The investment by Mitsui & Co. in Pinnacle Mobility, producer of the EKA brand of electric buses and commercial vehicles aims to establish India as an EV manufacturing leader, backed by Mitsui’s global network and VDL’s technology, thus endorsing the ‘Make in India’ initiative. Hinduja Tech’s recent USD 50 million partnership with Creador, bought a significant stake in the firm, showcases a push for developing advanced, sustainable mobility engineering solutions. This injection of funds is anticipated to enhance the company’s research and development operations, both organically and through acquisitions, to enhance its engineering solutions. The company aims to leverage this investment to expand its reach in the global market and accelerate its progress in sustainable mobility engineering services.
Similarly, the India-Japan Fund (IJF), a fund managed by National Investment and Infrastructure Fund Limited (NIIF), is investing USD 48 million in Mahindra Last Mile Mobility (electric three-wheeler maker), with the IJF’s stake ranging between 6-8 per
cent. This substantial investment will likely fuel advancements in the last mile mobility offerings, potentially accelerating the launch of new products or the expansion of the existing ones to meet the growing demand for sustainable transport solutions.
Such moves are not only about capital infusion but also about accessing new technologies, markets, and competencies. Shared mobility startup Yulu secured an investment of USD 19 million from Magna International and Bajaj Auto, followed by the company’s substantial growth.
Yulu aims to utilise this fresh funding for product innovation and network expansion, with an aim to sell over three million EVs in the next three years. River, an EV start-up, has raised USD 40 million in Series B funding, led by Yamaha Motor Co. Ltd. The round also witnessed participation from a consortium of existing investors, such as AI-Futtaim Automotive, LowercarbonCapital, Toyota Ventures and ManivMobility. The company aims to deploy the funds to scale the distribution and service network across the country and to further invest in R&D.
Both IPO and QIP activity witnessed increased activity compared to Q3 2024 with two IPO issues totalling USD 124 million, while QIP witnessed only one, JK Tyre and Industries’s USD 60 million fund raise via this route.