India-involvement announced M&A activity fell to a seven-year low in January-March 2023 at $10.8 billion, down 68.3 per cent from a year ago as number of announced deals dropped 3.3 per cent year-on-year, latest data from Refinitivshowed.

Target India M&A activity touched $ 8.5 billion, down 70.4 per cent from a year ago and the lowest first quarter period by value since 2016. 

Domestic M&A activity totaled $4.9 billion, down 67.3 per cent from the same period in 2022. 

Inbound M&A dropped 73.9 per cent from a year ago and totaled $3.6 billion. Outbound M&A activity reached $2.1 billion, down 58.8 per cent year-on-year with the United States as the most targeted nation with 39.2 per cent market share.

Private equity-backed M&A in India amounted to $2.6 billion, down 76.6 per cent from a year ago, and the lowest first quarter period since 2020. 

Cautious approach

Elaine Tan, Senior Analyst at Refinitiv, said that deal-making involving India saw its third consecutive quarterly decline in activity during January-March 2023, making it the slowest start to a year since 2016, as headwinds such as geopolitical tensions, supply chain disruptions, rising interest hikes, and global recession fears continue to dampen boardroom confidence and investor sentiment.  

“Given the global macroeconomic uncertainty, deal makers are taking a relatively cautious approach, translating into fewer large deals”, she added.

No deals bigger than $1 billion involving India have been announced during the first quarter of 2023, Tan added.

Globally, mega deals worth $5 billion and above also declined 48 per cent from a year ago.  “Overall cautiousness to execute deals will continue until market uncertainties ease and valuations settle down. However, local consolidations, sustainability-themed acquisitions, building technical capabilities and deployment of PE dry powder could potentially continue to drive activity in India for 2023”, Tan added.

The majority of the deal-making activity involving India targeted the Industrials sector which totaled $2.3 billion, up 1.1 per cent from a year ago and captured 21.5 per cent market share. 

Financials totaled $1.9 billion, down 55.2 per cent from a year ago with 17.8 per cent market share. Energy & Power captured 11.8 per cent market share worth $1.3 billion, up 123.6 per cent compared to last year. 

High Technology sector, which saw the greatest number of deals announced in Q1 2023 accounted for 7.4 per cent market share with $801.0 million, down 90.9 per cent in value from a year ago.

Equity capital markets

India equity capital markets (ECM) raised $5.3 billion during the January-March quarter of 2023, up 42.4 per cent compared to a year ago, making it the highest first quarter period by proceeds since the start of 2021. The number of ECM offerings grew 50.9 per cent year-on-year. 

Initial public offerings (IPO) from Indian issuers raised $ 142.8 million during the first quarter of calendar year 2023, down 86.7 per cent from a year ago, but number of IPOs saw a 36 per cent increase year-on-year. 

Follow-on offerings, which accounted for 97 per cent of India’s overall ECM proceeds, raised $5.1 billion, up 95.0 per cent from a year ago, while the number of follow-on offerings grew 68 per cent year-on-year.

ECM Issuance from India’s Industrials sector accounted for a majority of the nation’s ECM activity with 36.1 per cent market share worth $1.9 billion in proceeds, a significant increase from a year ago ($6.8 million). Materials captured 14 per cent market share followed by Retail and Energy & Power with 11.3 per cent and 10.8 per cent market share, respectively.

Jefferies LLC leads the ranking for India’s ECM underwriting with $1.87 billion in related proceeds and 35.5 per cent market share.

Tan said that in the IPO space, India saw the busiest start to a year since 2018 as the number of IPOs grew 36 per cent compared to a year ago, with 38 small-sized listings raising $142.8 million, a 87 per cent decline in proceeds. Muted performance in equity markets and several macroeconomic and geopolitical factors made issuers and investors relatively more cautious., she added.

Bonds - Debt capital markets

Primary bond offerings from India-domiciled issuers raised $23.9 billion during the first quarter of 2023, a 8.2 per cent increase in proceeds compared to last year, making it the highest first quarter period since 2021 ($25.8 billion), Refinitiv data showed.

Indian issuers from the financials sector captured 80.6 per cent market share that amounted to $19.3 billion, up 55.6 per cent in proceeds compared to last year. 

Government and Agencies followed behind with a 5.1 per cent market share worth $ 1.2 billion, a 34.7 per cent increase from a year ago.

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