Global companies and financial sponsors are keen to keep exploring both mergers and acquisitions (M&A) and initial public offerings (IPO) in India as they seek to tap into the country’s economic growth, according to top executives from JPMorgan Chase & Co.
Financial services, including insurance and banking, are attracting a lot of interest, according to Navin Wadhwani, JPMorgan’s head of investment banking in India.
“We are seeing some amount of M&A activity from some of the global strategics especially in financial services,” Wadhwani told Bloomberg TV.
India has turned into a hotspot for dealmaking activity as nearly $9 billion has been raised via IPOs this year, according to data compiled by Bloomberg. The volume of deals involving Indian companies has climbed by 28 percent to $77 billion, the data show.
The average M&A volume has increased annually to $140 billion from 2021 to 2024 year-to-date, double of what it was from 2011 to 2020, Wadhwani said. “There are a lot of activities from financial sponsors and private equities are very actively buying and selling and building businesses. That activity will continue,” he added.
According to a PwC report, the first quarter of 2024 marked a notable resurgence, signaling a shift from the declining trend observed throughout the preceding year.
With 455 deals, the quarter recorded a 24 percent rise in deal volume compared to Q4 CY23. Moreover, M&A deal value soared by 60 percent reaching $19.6 billion while private equity (PE) deal value experienced a slight dip.
The overall deal value for Q1 of 2024 stands at a $25.6 billion marking a significant increase from both the previous quarter and the corresponding period last year. Sector-wise, traditional sectors took the lead, drawing significant investments in the changing deal-making scenario. The media and entertainment sector topped the charts in terms of value, while the retail and consumer sector continue to lead in terms of the deal volume.
Deloitte in a report said as global firms increase their manufacturing presence in India, and as Indian firms with healthy balance sheets look to acquire capabilities abroad, cross-border investments are expected to emerge as a prominent theme in Indian manufacturing M&A.
With the integration of supply chains by Indian automotive firms to secure auto component and EV manufacturing capabilities, along with likely consolidation among electric vehicle OEMs, the automotive sector is expected to drive M&A in manufacturing.
Additionally, planned government Production Linked Incentive (PLI) outlay of $3.2 billion from FY22–23 to FY26-27 is expected to incentivise firms to increase production capacities. This is expected to result in increasing inorganic activity by players within the automotive sector.
Deloitte said that strong sectoral prospects in FinTech are expected to attract fresh investments to the sector, which has witnessed a slowdown since 2021. The Indian FinTech sector is expected to reach $150 billion in 2025, with a CAGR of 32 percent. The growth is expected to be led by emerging trends, such as AI-powered financial advisory, alternative finance, credit on UPI, etc. FinTech-bank alliances and mergers are also expected to grow, as FinTechs look at means to scale presence in regulated segments.
According to Deloitte, PE in M&A is projected to stay consistent in 2024, with decreasing inflation and interest rate softening. Analysts anticipate that interest rates in India, having likely reached their peak, will gradually hold and consolidate in 2024.
PE deal momentum is expected to start to recover and rise beyond 2024, in anticipation of the stable interest rates and record levels of dry powder of over $20 billion expected to be deployed. The energy sector is expected to emerge as a significant focus for PE, fuelled by sustained energy demand expansion and India’s favourable global positioning as a hub for renewable energy.
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