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Deal-making in India in the first three months of this calendar year raced to a four-year high, bucking the global trend where mergers & acquisitions fell sharply. Corporate India closed 608 deals worth $13.3 billion during the period, up from 408 deals worth $12.1 billion a year ago.

According to Grant Thornton Bharat’s Dealtracker report, this translates into a significant 49% growth in deal volumes and 9% increase in values compared to the January-March period of 2021. Deal volumes in India were driven not just by inbound deals but also domestic acquisitions by big boys like Reliance group, which closed eight deals during the quarter.

According to Refinitiv’s Investment Banking Review, India’s Inbound M&A activity grew 17.9% from a year ago and reached $11.6 billion – the highest first quarter period since 2017. Elaine Tan, senior analyst at Refinitiv, an LSEG Business, explains, “While global deal-making fell to its lowest opening period since 2020, the start of the Covid-19 pandemic, M&A activity involving India witnessed a strong start as the first quarter period reached a four-year high. The acquisition of technology and healthcare, availability of private equity and abundant cash reserves as well as historically low interest rates were key factors pushing the M&A growth so far this year.”

Private equity investments drove deal values in the first quarter of 2022 with 441 deals valued at $9.4 billion, which is the highest number of deals recorded in the opening quarter of any year, says Grant Thornton. Driven by 10 high-value investments of over $100 million, the e-commerce sector led the investment values, capturing 34% of PE values during Q1 of 2022, garnering investments worth $3.2 billion across 60 deals. The quarter also witnessed the emergence of 11 unicorns across tech-savvy sectors compared to only two unicorns created in Q1 of 2021.

During the quarter, 25 large deals above $100 million and 99 deals valued between $10-99 million were closed. The top 10 deals accounted for 60% of the total M&A deal values in Q1 of 2022. The frenetic deal-making activity was driven by both global and domestic biggies.

The largest deal during the quarter was Google International LLC’s inbound $700-million investment in Bharti Airtel and it accounted for 18% of the M&A value in telecom. During the quarter, Reliance group of companies closed eight deals across seven sectors. Five deals closed by the Reliance companies were among the top deals closed during the quarter that constituted 60% of the total value.

Commenting on the deal activity, Shanthi Vijetha, partner- growth at Grant Thornton Bharat, said, “Despite headwinds from the pandemic and other uncertainties, deal makers in India are notably optimistic about the prospects for a stronger economy in the current year and, therefore, we expect the momentum to continue in the coming months of 2022.”

In particular, the demand for new technological capabilities and underlying innovation is anticipated to grow. This is likely to drive M&A deal-making. The start-up ecosystem is expected to continue strong in 2022, fuelled by PE activity, with more new-age companies becoming unicorns, she said.

But the equity capital market (ECM) activity fell 64.3%, making it the lowest start to a year since 2019, as the number of ECM offerings fell 23.3%. In line with the global trend, the domestic IPO activity also declined 57.1% and the number of IPOs fell 14.8% on year.

The poor ECM show had investment banking fees falling by 33.5% to $179.7 million in Q1, making it the lowest first-quarter period since 2016. ECM underwriting fees fell 43.2% to $ 40.9 million, while DCM (debt capital market) underwriting fees fell 23.9% to $ 49.1 million, the slowest start to a year since 2016.

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Author: Howard Caldwell