Welcome to the Summer 2016 edition of India Watch, in association with the London Stock Exchange.
Each quarter, we track the performance of all Indian companies listed on the London Markets, while also giving an overview of Indian M&A activity and an analysis of the Indian economy. Read on for the summary highlights or download the issue for the full analysis.
Index outperforms FTSE and AIM indices in Q2 2016
It’s been a strong quarter for the Grant Thornton India Watch Index which was up by 21.9% in Q2 2016, compared with a rise of just 5.3% for the FTSE 100 and 1.2% for the FTSE AIM Index. This performance signals the second positive-growth quarter in a row, following an 8.7% increase in Q1, suggesting that investor interest could be back on track following a hesitant performance in 2015.
Technology companies and startups have performed particularly well, with the best performance coming from iEnergizer Ltd, a high-growth digital publishing firm and tech leader, which saw its share price gain 283.3% over the period.
Sustained deal momentum
Deal activity has also picked up and the first half of 2016 saw 750 deals worth almost US$22 billion – an increase over the 740 deals worth US$21 billion during the same period last year. While inward investor sentiment has been shaky due to recent geopolitical turbulence, outbound deal activity reached its highest level since 2014, with more than 50 deals valued at around US$3.1 billion.
The private equity (PE) market has seen stable growth, with more than 490 deals in the first half of 2016 worth US$6.1 billion. However, ticket size has shrunk, leading to a 13% decline in investment value, while interest has shifted towards early-stage funding and entrepreneurs, as investors exercise caution over big-ticket deals – with startups accounting for almost 70% of total deal volume over the period.
On the flipside, renewed interest from domestic investors resulted in a 12% year-on-year growth in the M&A market, with 259 deals worth US$15.7 billion. Deal size has remained substantial, with two deals breaking the billion-dollar mark, while a further seven were valued at more than US$100 million each. Consolidation has been a key trend in 2016, and the outlook for the rest of the year remains bullish with a strong pipeline and an expected uptick in private investments.
Cautious optimism for India's economy
The economic outlook is one of cautious optimism, with strong fundamentals and political reforms expected to sustain performance. Measures aimed at making it easier to do business in India have encouraged investment, while the weather department has predicted a good monsoon, which should boost growth, with GDP predicted to hit 8%.
However, rising food prices and delayed rainfall have caused concerns. Inflation rose to 5.8% in April 2016, while factory output declined by 0.8% year on year. Global volatility has also resulted in dwindling exports, which are expected to remain weak for the rest of the year. Structural reforms such as the proposed Goods and Services Tax (GST) will be key to India’s ongoing growth, while the recent relaxation of rules on foreign direct investments should also have a positive impact.
Reflecting on the UK-India economic relationship
Finally in this issue, we are delighted to feature an article by Shuchita Sonalika, the new UK Director of the Confederation of Indian Industry, who gives us her views on the economic relationship between the two countries.
“What we need now is to build a shared future,” she says, and her insightful article emphasises the importance of finding new channels for growth and supporting future-focused projects such as smart cities, engineering, digital media, creativity and leadership. The UK is currently the largest G20 investor in India while India itself is the third-biggest investor into the UK – offering exciting opportunities for the future.
If you would like to discuss any of the matters arising in this issue or how Grant Thornton’s South Asia Group can help you, please contact us.