Deal Volumes In India Plummet, Values Nosedive Almost 90% In April 2023: Report

Deal volumes in India continue to take a hit amid the global increase in interest rates and inflation. In April 2023, deal volumes declined 47 per cent, while their values dropped 89 per cent compared to April 2022.

Grant Thornton Bharat Dealtracker Report noted that the plunge was majorly due to the mega-merger of HDFC Bank and HDFC Ltd worth USD 40 billion witnessed in April 2022. Apart from this deal, April 2023 still witnessed a 24 per cent decline in deal values.

During the month, only 100 deals valued at USD 5 billion were undertaken in the country.

On Mergers and Acquisitions (M&A) deals front, India witnessed a steep 99 per cent decline in values. The deal values recorded just USD 477 million compared to USD 42.9 billion in April 2022. 

Th report noted that domestic deal activity continued to dominate the M&A space, accounting for two-thirds of overall M&A deal volumes for the month. Meanwhile, cross-border deal activity was subdued due to global macroeconomic factors, turmoil in the banking sector in the US and Euro zone, a fall in the price of commodities, specifically crude oil price.

“Global macroeconomic factors, turmoil in the banking sector in the US and Euro zone, fall in the price of commodities specifically crude oil price continues to dampen the deal activity. However, domestic M&A deal-making continues to be resilient backed by continued strong domestic demand,” said Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat. 

From the top five deals for the month that accounted for 81 per cent of overall M&A deal values, valuing USD 387 million, USD 218 million came from the pharma, healthcare and biotech sector, followed by deals in the energy sector.

Meanwhile, the IT sector recorded five deals in April, with 70 per cent deals coming from the software development segment, followed by activity in the professional consultancy and business services space. The sector also dominated the domestic and inbound activity (from the US) for the month.

In comparison to March 2023, April saw a marginal increase in deal volumes at 2 per cent while the values decreased by 6 per cent.

“We may also expect to see an uptick in PE activity in the coming months on the back of startups’ focus on profitability, resulting in investors turning bullish on select pockets of the Indian market,” Vijetha added.

Funding Winter Indeed

Private Equity (PE) activity also showed a sharp 45 per cent decline in investment volumes as the ‘funding winter’ raged on. But investment values surprisingly saw an uptick of 25 per cent over April 2022. 

The report surmised that the startup sector drove the volumes in PE segment and drew attention towards innovation and tech. Startups dominated deal activity by driving about 52 per cent of total PE deal volumes. 

Retail tech witnessed heightened activity, followed by enterprise application segment, together contributing to 41 per cent of startup sector volumes. Over 44 per cent startups operating in the B2B segment raised USD 93.4 million worth funds this month. 

The month of April also witnessed beverage giant Coca-Cola’s maiden investment in an Indian startup – Thrive (Hashtag Loyalty), which offers digital menus, logistics, customer insight and online payment solutions to its clients (partnership with 5,500 restaurants) to drive consumer engagement and grow online presence.

Pharma In Focus During April 2023 

The traditional sector of Pharma was in focus in April as it scored a big cheque. Temasek’s USD 2 billion investment in Manipal Health Enterprise was the largest deal in the Indian healthcare industry. This deal alone accounted for 45 per cent of the PE deal values for the month. 

The sector witnessed two other deals in the primary healthcare and medical devices space.

Meanwhile, ecommerce sector recorded nine deals following the startup sector in terms of volumes and energy sector led the values following the pharma sector, with investments worth USD 1.5 billion in the cleantech space.