India Inc's deal-making activity continued to remain tepid in February this year, with only 89 deals at a valuation of $1.8 billion, according to Grant Thornton Bharat’s Dealtracker February 2023 report. The deal-making activity during the month under review registered a 54% year-on-year (YoY) decline in terms of volume and a 60% YoY decline in terms of value, as compared to February last year as investors continued treading cautiously amid macroeconomic uncertainties. India Inc registered 190 deals valued at $4.5 billion in February last year. With this, India Inc has recorded the second-lowest deal volumes and lowest values since 2014.

The deal volume and value were also significantly lower on a sequential basis. In January this year, India Inc recorded 145 deals at a value of $2.7 billion.

"US economic data has been pointing towards a slowdown; however, the recession is not confirmed yet. China has seen an accelerated reopening, and that has provided a boost to the commodity market. On the domestic front, the policy review also acknowledges that domestic economic activity is expected to remain resilient, aided by the sustained focus on capital and infrastructure spending in the Union Budget 2023-24," Shanthi Vijetha, Partner-Growth at Grant Thornton Bharat says.

"While the deal activity is subdued, the Indian market is still considered to provide good opportunities for deals/investments. As a result, the Union Budget 2023 avoided populist measures in the pre-election year and prioritised long-term growth," Vijetha adds.

In terms of mergers and acquisitions, India Inc witnessed a significant downtrend both in terms of deal volumes by 48% and values by 47%, clocking 24 deals at $755 million, compared to February 2022. In February last year, India Inc clocked 46 deals valued at $1.4 billion. "While mergers and acquisitions values were dominated by cross-border deals, particularly outbound transactions, on the back of one big-ticket transaction of $578 million, the volumes continued to be dominated by domestic consolidations accounting for 67% of transactions," the report says.

According to the report, in terms of volume, the startup sector led the dealmaking activity with 25% of the deals, driven by the fintech segment, which dominated in terms of both volumes as well as values. This was followed by pharma, healthcare and biotech,and IT and ITeS sectors with 17% and 13% of deals, respectively. The automotive sector drove the values on the back of SAS Autosystemtechnik’s acquisition by Motherson International for $578 million. "This transaction alone was responsible for 77% of the total M&A values, making it the fifth-largest deal in this sector in the last 12 years," the report says.

Meanwhile, private equity investments during the month under review witnessed a drop in total deal volumes by 60% to only 65 deals valued at $1 billion, as compared to February last year. In February 2022, India Inc recorded 144 deals valued at $3.1 billion. “The month gone by recorded the lowest monthly deal volumes and values since August 2020. The decline in PE funding was largely due to uncertain market conditions and the wait-and-watch approach adopted around the Budget 2023 – 24," the report says.

In terms of private equity deal volumes, the startup sector topped the charts. Of this, retail tech, enterprise application, and edtech segments collectively contributed 54% of the startup sector’s private equity deal volumes. In terms of private equity deal value, ecommerce sector topped the charts for the month on the back of three big-ticket fundings valued above $100 million. "This month saw the largest ever Series A round by an Indian insurtech company, InsuranceDekho, raising USD 150 million. This transaction alone accounted for 38% of the sector’s values," the report says.

India Inc dealmaking activity

India Inc’s deal volume fell 54% in Feb: Grant Thornton