M&A, PE Sectors Decline In April, Start-up, Pharma Show Resilience

Only 100 deals were valued at USD 5 billion, with a 47 per cent decline in deal volumes and a steep 89 per cent decline in values in April 2023 as compared to April 2022, according to the Grant Thornton Bharat Dealtracker Report. 

The report says that this was mainly due to the mega-merger of HDFC Bank and HDFC worth USD 40 billion witnessed in April 2022. However, barring this deal, April 2023 still witnessed a 24 per cent decline in deal values.

Commenting on the slow pace, Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat said, “Global macroeconomic factors, turmoil in the banking sector in the US and Eurozone, fall in the price of commodities specifically crude oil price continues to dampen the deal activity.” 

However, domestic M&A deal-making continues to be resilient backed by continued strong domestic demand. We may also expect to see an uptick in PE activity in the coming months on the back of start-ups’ focus on profitability, resulting in investors turning bullish on select pockets of the Indian market, Vijetha added.

Mergers and Acquisitions (M&A) landscape: The M&A deal activity saw a significant downtrend in terms of deal volumes by 53 per cent and deal values, with only 24 deals at USD 477 million compared to 51 sales of USD 42.9 billion in April 2022. The decline in values was mainly due to the absence of big-ticket investments in addition to one of the biggest mergers, HDFC and HDFC Bank worth USD 40 billion witnessed in April 2022. The report further notes that while domestic activity dominated the M&A activity, cross-border activity saw the lowest April month deal volumes and values since 2011. The deal of the month was Ipca’s 33 per cent acquisition of Unichem for USD 126 million. The top five deals for the month accounted for 81 per cent of overall M&A deal values, valuing USD 387 million. Of these, USD 218 million came from the pharma, healthcare, and biotech sector followed by deals in the energy sector.

Private Equity (PE) landscape: PE activity saw 76 deals valued at USD 4.5 billion. The funding winter continued to cause a 45 per cent decline in investment volumes. In contrast, the start-up sector continued to drive the volumes drawing investors' attention towards innovation and tech. The report noted that traditional sectors like pharma, energy, and banking garnered large cheques driving the investment values for the month. Driven by Temasek’s USD 2 billion investment in Manipal Health Enterprise, the largest deal in the Indian healthcare industry, the pharma, healthcare, and biotech sector dominated the PE deal values. This deal alone accounted for 45 per cent of the PE deal values for the month.

IPO landscape: YTD 2023 recorded 6 initial public offerings (IPOs) with an issue size of USD 58.9 billion, compared to 9 IPO issues, raising USD 2 billion in YTD 2022.