Decline in Deal Making Activity

Despite the stock market hitting new highs in 2023, deal making activity in India faced challenges amidst a liquidity crunch. According to a report by Grant Thornton, India’s deal making witnessed a significant decline, with the total value shrinking by 52% to $66 billion compared to 2022. The number of deals also decreased by 21% to 1,641 transactions.

Factors Affecting Deal Making

Shanthi Vijetha, Partner, Growth at Grant Thornton Bharat, attributed this decline to several factors, including the lack of liquidity in international markets, volatile market conditions, and cautious investor sentiment. These challenges hindered the anticipated revitalization of funding following India’s strong performance in global markets in the previous year.

Rarity of Large Deals

In 2023, large deals became less common compared to the previous year. The year witnessed only eight multi-billion-dollar M&A and PE deals, totaling $12.5 billion, in contrast to eight deals totaling $26.2 billion in 2022.

Shifts in M&A Landscape

M&A activity, which started slow, experienced an uptick in the second half of the year. Domestic deals dominated, comprising 350 transactions valued at $14.4 billion. Inbound activity saw significant growth, with 84 deals totaling $7.7 billion. However, outbound activity remained stable, with values declining from $17.9 billion in 2022 to $3.2 billion in 2023.

PE Activity and Startup Funding

PE activity witnessed a sharp decline due to the funding crunch in the startup ecosystem. The largest PE deal was Temasek Holdings’ $2 billion investment in Manipal Health Enterprises. Startup funding decreased by 42%, with retail startups leading in deals, followed by fintech and SaaS startups.

Sectoral Trends

Despite the overall decline, sectors such as banking (financial services), energy (cleantech), manufacturing, and real estate experienced increased deal activities. Significant investments were also seen in sectors like pharma (hospitals and biopharmaceuticals), energy (cleantech), retail, and real estate.

Market Activity Breakdown

Qualified institutional placements (QIPs) surged ahead of IPOs, raising $7 billion. This surge signals an improving investor outlook on the Indian market, with the manufacturing sector leading in QIPs, followed by banking and financial services.

Conclusion

Despite facing challenges, India’s deal making landscape remained dynamic in 2023. While large deals became rarer, domestic and inbound activities saw growth, and sectors like manufacturing and banking witnessed increased investor interest. With a surge in QIP activity and anticipation of economic growth, the outlook for India’s deal making landscape appears promising.