Contracting activity in India fell to $4.1 billion in value terms in August 2022 and a nearly 40 percent year-on-year decline in volume terms, according to a report by consultancy firm Grant Thornton India. It added that month-on-month, deal volume was down 23 percent at 131 transactions in August but value more than doubled due to two deals valued at more than $1 billion.
“The downward trend in deal activity is due to buyers’ and investors’ cautious approach to larger capital commitments in light of global macroeconomic conditions and capital market conditions. Hence the absence of big ticket transactions. Contracts activity is instead dominated by early-stage firms, with smaller ticket sizes,” Grant Thornton said in the report.
It added that mergers and acquisitions (M&A) deal activity declined compared to both July 2022 and August 2021 and deal value, on the other hand, was $1.5 billion (a 79 percent increase compared to August 2021), driven by the acquisition of JSW Energy. Maitrah Energy’s 1.75 GW renewable portfolio for $1.3 billion.
M&A deal activity, dominated by domestic consolidation, recorded a 43 percent decline compared to August 2021, recording 21 deals. It was also the lowest monthly volume witnessed in the last 22 months. For this reason, overall M&A volume was the lowest monthly figure recorded till date after witnessing 17 deals in April and May 2020 (due to COVID-19).
“Deal activity is showing a downward trend due to cautious view of large caps by buyers and investors in view of global macroeconomic conditions and capital market conditions,” said Shanti Vijaya, its partner. Deal activity appears to be low in part because most M&A deals do not disclose valuations, Bizetha added.
Private equity (PE) transactions recorded 110 deals with fund flows of $2.5 billion and continued to account for more than 84 percent of overall deal activity and 62 percent of deal value for the month. However, both volume and value witnessed a significant decline compared to August 2021 which saw record monthly value and second highest volume driven by 18 high-value investments at $100 million each.
The start-up sector continued to lead PE deal volume for August, with a 64 percent share of PE volume and investment value of $300 million, it said.
“YTD (year-to-date) 2022 saw a 15 percent increase in deal volume with value nearly doubling to US$110 billion. While PE deal volume contributed to overall deal volume growth, deal value was driven by billion dollar M&A deals. YTD M&A deal volume saw highest volume and record YTD value since 2015. While YTD PE investment has witnessed record volume, investment value has declined by 13 per cent due to reduction in big-ticket investments between $100 and $999 million,” the report added.
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