Delhi HC quashes summons against former DU College principal

New Delhi: The Delhi High Court has...

CHRISTIANITY: Abide in Christ’s love

In John 15:9, Jesus commands His disciples...

Confronting America’s fiscal disaster

Reducing the size and cost of government...

India’s deal volumes drop, big-ticket transactions boost value

BusinessIndia’s deal volumes drop, big-ticket transactions boost value

NEW DELHI

The impact of the global economic slowdown is being felt in the deal activity in India with deal-making in India experiencing a decline of 46 per cent in deal volumes compared to July 2022. However, the market surged with a 58 per cent increase in deal values in July 2023, with a record 95 deals amounting to USD 3.1 billion fuelled by big-ticket transactions and reflecting what Grant Thornton Bharat describes as calculated strategy in the business world. The catalyst for this growth was the emergence of nine big-ticket transactions valued over USD 100 million, aggregating an impressive USD 2.1 billion.

The drop in overall deal volumes in July 2023 can largely be attributed to a significant decrease in private equity investments. The tech-dominated sectors, such as start-ups, e-commerce and IT continued to drive deal volumes. India’s attractiveness as a destination for deal-making and investments is expected to persist and H2 2023 is likely to witness improvement in deal activity, despite global macroeconomic conditions. Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat observes the impact of the global economic slowdown being felt in the deal activity in India as it has been subdued since the beginning of the year compared to 2022. While the cross-border transactions propelled the surge in total deal values, the carefulness in private equity investment caused a reduction in overall volumes. That apart, “India’s attractiveness as a destination for deal-making and investments is expected to persist and the second half of 2023 will witness improvement in deal activity, despite the global macroeconomic conditions,” says Vijetha.

This month, while merger and acquisition (M&A) deal activity experienced a 17 per cent decline in deal volumes, values recorded a notable 7x increase as compared to July 2022, recording 29 deals valued at USD 2 billion. The increase in deal values were driven by six high value deals across traditional sectors such as IT, auto, retail and manufacturing. The domestic activity continued to dominate the M&A landscape, but the month also saw heightened cross-border activity with 10 deals worth USD 1.4 billion. The M&A values have been driven by Proximus Opal’s 58 per cent controlling stake acquisition in Route Mobile for USD 721 million. Inbound interest was received from companies in Belgium, the UK and the US, while Germany dominated outbound acquisitions, followed by Japan and Singapore.

Outbound activity reached its highest monthly level in 2023, while inbound activity recorded the highest monthly values since July 2021. Remarkably, cross-border activity accounted for five of the top six M&A deals for the month. Private Equity (PE) investments experienced a modest decline with 66 deals, at USD 1.1 billion million, marking the second lowest monthly volumes and values since August 2020. Boost in average deal size to USD 16.5 million compared to USD 12 million in July 2022 was propelled by three high value deals.

July marked the emergence of India’s first unicorn start-up of the year, Zyber 365 Technologies, securing USD 100 million in Series A funding at a valuation of USD 1.2 billion. It has now become the fastest unicorn in both India and Asia. The start-up sector dominated in terms of deal volumes, with the retail segment leading and accounting for 40% of the sector’s deals, valued at USD 58 million. Notably, the month continued to observe a significant presence of B2B start-ups, which accounted for more than 52 per cent. Bain Capital’s 90 per cent stake in Adani Capital Private Limited and Adani Housing Finance Private Limited marked the biggest deal in the sector, for USD 176 million. The data analytics, big data and AI segment took the lead in terms of values, contributing 41 per cent of the sector’s total values. The aerospace and defence, media and entertainment, and professional/business services sectors registered lower activity compared to the same month last year.

However, there was increased activity in e-commerce, automotive, banking and financial services, transport and logistics, telecom, and education sectors. In the month of July, Radhakishan Damani, founder of Avenue Supermarts, acquired Health and Glow, marking his second significant acquisition after Bombay Swadeshi Stores, which is the country’s oldest retailer. The financial sector took the lead in PE investment values, contributing 37 per cent of the total for the month, driven by two high-value deals exceeding USD 100 million each. Fintech startup Vegapay, a digital lending and card management platform raised USD 1.1 million in a pre-seed funding round led by Eximius Ventures along with DSP HMK, Capri Global, Upsparks Capital, MGA Ventures, Climber Capital, Arun Venkatachalam (Murugappa Group), Pratekk Agarwaal (General Partner @ GrowthCap Ventures) and a host of angel investors. Vegapay is building a lending tech stack and card management system that enables regulated entities as well as fintechs to issue and further increase card as well as lending penetration in India. Additionally, investors showed keen interest in the education finance market, investing USD 57 million in Auxilo Finserve.

The broader pharma and healthcare sector received investments worth USD 159 million in July. Notably, Maxvision Eye Hospital secured a significant investment of USD 159 million from healthcare-focused PE player, Quadria Capital, marking one of the largest investments in India’s eyecare space. In addition, there were activity in the consumer durables and FMCG space. Compared to June 2023, July reported increased activity in the auto, media and entertainment, and real estate sectors, while it had low activity in the agriculture and hospitality sectors. A notable insolvency and bankruptcy case this month, was the acquisition of Germany-based manufacturing company Dr. Schneider Group by Noida-based Samvardhana Motherson for USD 131.6 million.

The year-to-date (YTD) 2023 volumes for the year showed a remarkable 42 per cent decrease, with a decline in deal values plummeting by a staggering 75 per cent, reaching a total of USD 26.2 billion. The starkness of this decline can be attributed in part to the exceptionally high benchmark set by landmark deals witnessed during the YTD 2022 period. These included noteworthy mergers and acquisitions such as the HDFC-HDFC bank merger, LTI-MindTree, and deals involving the Adani Group with Ambuja Cement Ltd and ACC Ltd, all of which were valued at over USD 10 billion each. Additionally, a global economic slowdown and cautiousness among investors in an uncertain environment played a role in this downward trend. Furthermore, the absence of major big-ticket investments further contributed to the substantial decrease in overall deal values

The report concludes with a note of caution on the continuity of a downturn in the Indian deal-making landscape in 2023, characterised by restrained investor actions and a dearth of substantial investments amid global economic uncertainties. The path forward hinges upon the market’s adeptness in addressing these challenges, setting the stage for a prospective resurgence, the report notes.

- Advertisement -

Check out our other content

Check out other tags:

Most Popular Articles