India Inc. deals show a 54% slump in volumes and a significant 60% decline in values in 2023 compared to February 2022, according to Grant Thornton Bharat’s Dealtracker February 2023 report.
This decline came as investors continued treading cautiously amid macroeconomic uncertainties.
Altogether, only 89 deals, valued at USD 1.8 billion, were inked. This also marked the second-lowest deal volumes and lowest values recorded since 2014.
Speaking on the trend, Shanthi Vijetha, Partner-Growth at Grant Thornton Bharat, said, “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.
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.”
According to findings, mergers and acquisitions (M&A) deal activity witnessed a significant downtrend both in terms of deal volumes by 48% and values by 47%, clocking 24 deals at USD 755 million, compared to February 2022.
While M&A values were dominated by cross-border deals, particularly outbound transactions, on the back of one big-ticket transaction of USD 578 million, the volumes continued to be dominated by domestic consolidations accounting for 67% of transactions. The start-up sector led the volumes with 25% of the deals, driven by the fintech segment, which dominated in terms of both volumes as well as values.
The pharma, healthcare, and biotech, and IT and ITeS sectors followed the start-up sector with 17% and 13% of deals, respectively. The automotive sector drove the value of SAS Autosystemtechnik’s acquisition by Motherson International for USD 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 private equity (PE) investment trend also witnessed a drop both in terms of deal values and volumes over February 2022, recording only 65 deals worth USD 1 billion.
The month that has 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 Budget 2023–24. With 60% of total PE deal volumes, the start-up sector continued to top the deal chart.
Retail tech witnessed heightened activity, followed by enterprise application and edtech segments, which together contributed to 54% of the start-up sector volumes. The e-commerce sector drove the values for the month on the back of three big-ticket fundings, all at or above USD 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 value.
The year-to-date witnessed a major decline in deal volumes as well as values, with 234 deals valued at USD 4.5 billion. This was a 46% decline in overall volumes and a 58% decline in values over YTD 2022. Although the year witnessed a mix of domestic and cross-border deals across various sectors, indicating the diversity and depth of India's investment landscape, the overall level of activity deteriorated. The year also witnessed the continued funding of winter in terms of both PE deal volumes and values.