According to new research from Grant Thornton UK LLP, 2017 was a milestone year for Indian corporate transactions. More than 1,100 deals reached a total value of over USD60 billion, the highest yearly deal value ever recorded.
Private Equity (PE)
The report found that Indian PE activity reached record levels in 2017, with deal values totaling over USD20 billion; a substantial increase of over 45% compared to 2016 (nearly USD14 billion). A key driver behind this growth included PE funds being able to achieve strong performances in their portfolio companies and cash-in on high return exit opportunities.
While the overall number of transactions involving PE investment dropped, the level of activity was greatly buoyed by the presence of some big ticket PE investments in sectors such as banking, real estate, retail and telecoms. Together, these sectors made up 50% of overall PE deal value.
While PE activity reached a record high, M&A activity dipped slightly in 2017. The year recorded a total M&A deal value of just over USD40 billion, down from USD44 billion in 2016.
The level of M&A activity also dropped, down 20% compared to 2016, recording just 411 deals last year.
The analysis found that domestic activity remains a key contributor to M&A activity in India. In 2017, 250 domestic transactions were recorded, amounting to USD32 billion and accounting for 80% of total M&A value.
Cross-border deals were at their lowest level since 2009, recording 161 transactions with a cumulative value of just USD8 billion. This represents a 14% decrease in cross-border deal volume and a substantial fall of 70% on the deal value of 2016.
Cross-border activity with Europe
In particular, 2017 recorded a dip in cross-border activity with Europe for the fourth year in a row.
European deal value dropped by 37%, to USD1.4 billion, and deal volumes were down 22% compared to 2016.
Despite the overall fall in India-Europe cross-border activity, European investors’ interest in Indian markets continued. 2017 saw a 15% increase in inbound deal volume and a 57% increase in deal value compared to 2016.
“2017 has been a milestone year for Indian corporate transactions, reaching a record high for deal value. The year also saw private equity activity flourish with big ticket investments buoying activity in a number of sectors. While the momentum behind India’s M&A activity dipped slightly last year, we expect it to remain robust through 2018, with domestic deal activity impacting positively on transaction dynamics.
“While we saw cross-border deal activity with Europe decline, it is clear that interest from European investors remains with inbound activity increasing. This is predicted to increase further as reforms such as the implementation of the Goods and Services Tax will improve the ease of doing business in India and enhance India’s attractiveness as a foreign investment destination.
“The pipeline of reforms in the run-up to the 2019 elections and the Indian government’s persistent efforts to attract foreign capital in core sectors is expected to keep deal activity high in the coming year. With continued political stability, economic reforms being implemented at a fast pace and macroeconomic factors looking positive, 2018 could be one of India’s best years for M&A, with the potential to reach an even higher level than that in 2017.”