Start-ups Lead Deals in February With 25 per cent Of Total Volume

The start-up sector led the volumes with 25 per cent of the deals, driven by the fintech segment, which dominated in terms of both volumes as well as values, stated Grant Thornton Bharat’s Dealtracker February 2023 report.

As per the report, the pharma, healthcare and biotech, and IT and ITeS sectors followed the start-up sector with 17 per cent and 13 per cent of deals, respectively. 

“The automotive sector drove the values on the back of SAS Autosystemtechnik’s acquisition by Motherson International for USD 578 million. This transaction alone was responsible for 77 per cent of the total M&A values, making it the fifth-largest deal in this sector in the last 12 years.

Meanwhile, India Inc recorded only 89 deals, valuing USD 1.8 billion. This translated to a 54% decline in volumes and a significant 60% decline in values compared to February 2022 as investors continued treading cautiously amid macroeconomic uncertainties. This also marked the second-lowest deal volumes and lowest values recorded since 2014.

Shanthi Vijetha, Partner- Growth at Grant Thornton Bharat said, “US economic data has been pointing towards a slowdown; however, the recession is not confirmed yet. China has seen an accelerated reopening, and that has provided a boost to the commodity market. 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 and investments. As a result, the Union Budget 2023 avoided populist measures in the pre-election year and prioritised long-term growth.”

Mergers and acquisitions (M&A) landscape: M&A deal activity witnessed a significant downtrend both in terms of deal volumes by 48 per cent and values by 47 per cent, 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 per cent of transactions. 

Private equity (PE) landscape: The 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 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 the Budget 2023 - 24. With 60 per cent 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 together contributing to 54 per cent 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 and 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 per cent of the sector’s values.

Year-to-date: YTD 2023 witnessed a major decline in deal volumes as well as values, recording 234 deals valued at USD 4.5 billion. This was a 46 per cent decline in overall volumes and a 58 per cent 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 activity deteriorated. The year also witnessed the continued funding winter in terms of both PE deal volumes and values.

IPO and QIP landscape: YTD 2023 recorded one IPO with an issue size of USD 8 million, compared to three IPO issues, raising USD 1 billion in YTD 2022. QIP, on the other hand, saw muted activity compared to two issues raising USD 264 million over YTD 2022. Both IPO and QIP activities continued witnessing a decline amidst volatile markets.