The glass half full – Indian M&A at the halfway mark

Big-ticket India bids recede amid a subdued global market but investor confidence remains

Globally, a lot has happened since the start of 2023, with the cost of capital rising, inflation soaring, a spate of high-profile banking collapses and generative AI shaking up the technology sector. Amid such turbulence, the Indian M&A market posted a more subdued period for marquee bids, with US$60 billion of announced deals in the first half of the year (compared to US$152 billion for the same period in 2022). Headline bid activity was spread across a broad range of sectors, including infrastructure and new energy.

Private capital remained a strong component of Indian deals with inbound investment from the US, Canada and the Middle East again evident. These deals were mainly concentrated in healthcare, real estate, financial services and renewable energy. Notable deals included Abu Dhabi Investment Authority (ADIA)'s US$500 million commitment to Kotak Mahindra Bank's real estate fund, Quadria Capital's US$155 million investment into Maxvision Eye Hospitals and General Atlantic's US$100 million investment in PhonePe, the unified payment interface provider. Temasek’s US$2 billion acquisition of a majority stake in Manipal Health Enterprise was the largest deal in the Indian healthcare industry this year. Several private capital funds, such as Sweden's EQT and the Canada Pension Plan Investment Board have vowed to commit further funds to India, further bolstering a market already attracting increasing sponsor interest.

The renewable energy sector, meanwhile, has seen upwards of US$10 billion of deals so far this year with investors including Sumitomo Mitsui, KKR, Brookfield Asset Management and Tiger Global. Regulatory developments in India have underpinned this ESG focus, with Indian agencies setting out a revised legislative landscape for the sector. With the ESG framework in India remaining in its infancy, there will be significant interest in how the country's transition to carbon-neutrality proceeds.

Fintech/banking also continues to be active with BharatPe acquiring a 51% stake in the financial company Trillion Loans and InsuranceDekho raising US$150 million in the largest ever series A round by an Indian insurtech company.

While activity levels were not as high as in previous years, the technology sector in India has remained reasonably active. There have also been several deals in the retail space reflecting the vast growth potential of India's consumer sector, with Aditya Birla Fashion and Retail acquiring TCNS Clothing for US$201 million and ADIA investing US$50 million to US$60 million in Purplle, an online beauty retailer.

This wide variety of sectoral targets is a reminder of the range of industries attracting significant investor attention amid a wider Indian growth story.

Outlook for 2023

While deal activity has been promising, a slowdown is also clearly visible in comparison to 2022. Despite the slowdown, certain corridors remain buoyant with activity, in particular, the India-US, India-Canada, and India-Middle East corridors. We also anticipate that activity is likely to pick up in the Australia-India and UK-India corridors in the backdrop of trade deals. Sector-wise, infrastructure and renewables will continue to dominate.

In the real economy, there have also been significant tech-related layoffs and a couple of prominent start-ups like Byjus and Dunzo Digital have been struggling in this tough climate. Notably, not a single Indian start-up has attained unicorn status this year – achieving a US$1 billion valuation – a stark contrast to the first half of 2022, which saw 18 new unicorns emerge from India's start-up scene.   

However, with a proven record in technology and early-stage companies, huge demand for infrastructure and clean energy investment, a fast-expanding population and some of the strongest growth rates in the G20, India's fundamentals will likely retain significant investor confidence. While many expect a period of relatively subdued deal activity, India's growth story looks far from over.