The volume and value of mergers and acquisitions in India hit new records, defying a global slowdown in deal-making as central banks turned off the liquidity spigot.
Deal value in India rose 58% to $148 billion in the nine months to 30 September from $93.5 billion in the year earlier, Refinitiv data showed. It even exceeded the full-year figures of $127.6 billion in 2021 and $132.2 billion in 2018, according to Refinitiv.
The deal value was boosted by large transactions such as the $60 billion merger of HDFC Bank with parent Housing Development Finance Corp. Ltd, the $7.1 billion merger of L&T Infotech and Mindtree, and the $6.2 billion acquisition of Ambuja and ACC by Adani group.
In another record, 1,795 deals were struck in the nine months, up 21% from 1,490 deals in the same period last year.
Industry experts said deal activity in India had seen a consistent upward trend and that the Indian market could soon become a $200 billion M&A market.
“M&A volumes are going up in a consistent manner, and this year, we expect it (the Indian M&A deal market) to touch $200 billion. We have seen a couple of very large deals in the financial services and cement sectors. Indian M&A is at an inflection point and could see M&A activity close to $200 billion a year in the near future on a sustained basis. This year, we have seen the volumes of M&A deals go up, driven by a few large deals and other deals diversified across sectors,” said S. Ramesh, managing director and CEO of Kotak Investment Banking.
Several factors are driving the M&A activity, such as reasonable valuations, large pools of capital available with private equity investors and the return of foreign strategic investors, Ramesh said.
“In many businesses and sectors, valuations are reasonable; therefore, buyers are happy to grow inorganically. In select cases, foreign buyers have also come back into play. There is growth restriction in their home markets, and they have to look at larger growth markets for their future, so they are evaluating the Indian market seriously. There is interest in consumer, technology, financial services and manufacturing. Financial sponsors are sitting on large pools of capital, and they are eager for more buyouts and investments,” he said.
Sectors such as renewables and new energy are likely to see strong M&A activity as more Indian companies enter the sector.
“Earlier, it was largely the financial sponsors that were deploying capital. But most corporate groups have now entered that sector, and that will spur M&A in addition to organic growth,” said Ramesh.
Elaine Tan, a senior analyst at Refinitiv, noted that deal-making activity hit record levels, defying a global slowdown, helped in part by PE-backed acquisitions. India saw a higher share of PE-backed acquisitions this year than China, a first since 2008. “PE-backed acquisitions in India also bolstered activity and witnessed the busiest-ever period, with the number of announced deals jumping 35% from a year ago. By value, India captured a 28% share of Asia Pacific’s PE-backed acquisitions, while China accounted for a 24% market share. This is the first time since 2008 that India accounted for a larger market share than China in Asia-Pacific’s PE-backed M&A activity,” Tan said.
Consolidation for value creation and market share gain is expected to drive activity across sectors such as financials, technology, healthcare, energy and industrials, Tan said, adding that energy transition and renewables continue to be a key theme this year and could witness further activity as companies focus on transitioning to green assets, clean energy and renewables.