Deal activity going strong in India

India continues to see strong growth in deals activity with the year so far recording 442 mergers and acquisitions (M&As), and private equity (PE) deals worth $44 billion (Rs 2.7 lakh crore), a 26% increase in deal value from the previous year, according to Grant Thornton, an advisory firm.

M&As recorded a 27% increase year-on-year in deal value, primarily due to a revival in domestic and cross-border deal activity, says the report.

Relative easing of regulations, and consolidation across sectors significantly drove up deals activity in April 2018; the month recorded 119 M&A and PE deals worth $21 billion dollars.

“Internal and global group restructuring plans, consolidation and sale and merger of non-core businesses seem to be the underlying themes for the key M&A transactions. Carving out non-core businesses, group restructuring to reduce debt levels, and pending IBC (Insolvency and Bankruptcy Code) cases will drive M&A transactions in manufacturing and retail whereas consolidation and competition strategies will stimulate transactions in the e-commerce segment. The increasing role of technology and automation will attract transactions in the IT (information technology) and ITeS (information technology-enabled services) and BFSI (banking, financial services and insurance) sectors,” said Pankaj Chopda, director at Grant Thornton India.

Chopda expects the momentum to continue this year. “Given that in the four months ended April 2017 the value of deals reported is already close to 75% of the annual deal value reported in 2017, we expect the deal momentum to continue. Further, given that 2019 will be an election year, we expect the government to further accelerate policy reforms, which will further fuel the deal momentum,” Chopda said.

The report says that intense competition among established players indicates that more M&As are around the corner. April saw 40 M&As worth $19.1 billion, the highest monthly values recorded after $23.8 billion in March 2017.

April this year saw two $1 billion deals and 10 deals valued at around $100 million each, accounting for 97% of the total M&A deal value; the year-ago period witnessed only six deals valued over $100 million. The volume of deals in April rose 29% from March, while deal value increased 11.8 times.

The telecom sector accounted for 77% of total deal value followed by consolidation in the energy sector, while deal volumes were driven by the start-up sector, capturing a 20% share.