Why M&A deals in India are down 80% so far in 2023

Mergers and acquisitions (M&As) by Indian companies have declined sharply by 80 per cent so far this year, in contrast with the same period last year, as bankers predict lower deal volumes due to falling profit margins of Indian companies and feeble stock markets.

The decline in Adani Group shares has also hit buyer sentiment.

According to data from Refinitiv, M&As in India stood at $3.3 billion from 253 deals, year-to-date (YTD) - a fall of 80 per cent year-on-year (YoY).

Cross-border deals by Indian companies were also down 84 per cent to just $1.5 billion.

“Buyers are waiting for company margins to improve.

"They will take a call after the January-March quarter results are out.

"We expect deal volumes to pick up after April,” said Gopal Agrawal, head of investment banking at Edelweiss, a financial services company.

According to an analysis by Business Standard, the combined net profit of 2,790 listed companies (excluding banking, financial services and insurance) was down 14.2 per cent YoY to about Rs 1.49 trillion in the October-December quarter of 2022-23, from Rs 1.74 trillion a year ago.

Bankers said Adani Group, one of the aggressive acquirers in the past three years, may come back to the market after valuations of its group companies stabilise.

“Most buyers are waiting awhile before taking a call since the asset’s valuation is not expected to go up just yet,” said Agrawal.

A similar trend in M&A activity is also visible in global numbers. Private equity-backed M&A activity added up to $50.7 billion YTD in 2023, down 70 per cent from a year ago.

Bankers said a slowdown in the first quarter of the calendar year is transitory in nature.

Deal volumes are expected to increase in India later in the year.

Blackstone, one of the largest global investors in India with $50 billion of investment across real estate and private companies, is reportedly scouting for more deals in the infrastructure and real estate sectors at the right valuation.

The ongoing slowdown, said executives, is just a temporary blip.

“Several factors seem to be at play for a dent in investor sentiment – most striking being macroeconomic challenges, fears of recession, and concern over start-up valuations,” said Aurojyoti Bose, lead analyst, GlobalData.M&A