India sees 42% decline in deal volumes in H1’23 amid economic challenges

Economic downturns, persistent inflation and a decrease in high-value transactions has made a sizeable dent on India’s merger and acquisition as well as private equity and venture capital (PE/VC) deal landscape in the first half of the calender year 2023. According to the latest Grant Thornton Bharat Dealtracker Report, deal volumes plummeted by 42 per cent with only 676 deals recorded, amounting to a total value of USD 23 billion, marking a substantial 78 per cent decline compared to H1 2022.

Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat attributes the decline in deal activities in the first half of 2023 primarily due to uncertainties causing supply chains disruptions, leading to inflation, and fluctuating interest rates. “However, with the given macroeconomic conditions, reduced market volatility, and stable interest rates, there is an optimistic outlook for increased deal making activity in the coming quarters,” says Vijetha. The steady increase in month-on-month deal activity since February indicates a healthy recovery. India continues to be an attractive market for investors to capitalise on. A resurgence in deal values is anticipated, reflecting the potential of the Indian market, according to Vijetha.

The M&A space bore the brunt of the decline, witnessing a 47 per cent decrease in volumes and a substantial 92 per cent decline in values, primarily due to the absence

of significant transactions observed in H1 2022. This period saw two major historic deals in India — the HDFC – HDFC Bank merger and the L&T – Mindtree merger. These large-scale transactions significantly boosted deal values during that period. During the first half of 2023, both domestic and inbound deal activity experienced the second lowest levels of deal volumes since 2011 for the six-month period. Outbound activity, on the other hand, reached its lowest volume with only 21 deals, due to absence of any billion-dollar deals. The real estate sector drove the values in H1 2023 due to one-billion-dollar transaction worth USD 2.45 billion namely Suraksha Realty’s 100 per cent acquisition of Jaypee Infratech. This deal alone accounted for 37 per cent of the M&A values for the last six months. Driven by 34 deals, the start-up sector led the volumes in the M&A space.

In the PE/VC space, 521 deals were recorded, totalling USD 16.4 billion, representing a 40 per cent decline in volumes and a 35 per cent decline in values. However, H1 2023 witnessed three-billion-dollar deals and 29 high-value deals in the PE/VC sector, mitigating the steep decline observed in the M&A space. The pharma, healthcare, and biotech sector emerged as the leader in terms of value in the given year. This was primarily due to a significant one-billion-dollar deal and three other high-value deals within the sector, which combined were valued at USD 3.45 billion. These deals accounted for 21 per cent of the total private equity (PE) values. Among them, Manipal Health Enterprises’ fundraising by Temasek Holdings stood out as the largest deal ever recorded in the Indian healthcare sector, amounting to USD 2 billion. This deal alone represented 55 per cent of the total sector values.