India witness $152 billion in M&A in 2022
- ByStartupStory | December 29, 2022
As businesses attempted to consolidate their positions and expand into new markets, India had a record number of mergers and acquisitions (M&A) in 2022. Some of the largest-ever transactions occurred in industries like banking, cement, and aviation. According to Sonia Dasgupta, managing director and chief executive officer for investment banking at JM Financial, the overall value of M&A agreements in India was $152 billion in 2022 (year to date), up from $107 billion in 2021.
By signing record agreements in 2022 since 2018, India has resisted the global M&A industry’s negative tendencies, Dasgupta continued. JM Financial reported that M&A transactions were valued at $95 billion in 2018, $60 billion in 2019, and $20.76 billion in 2020, based on data for announced transactions from Mergermarket. She said, “Domestic deals took up a major share of the deals (72% by value and 52% by volume). Technology and financial services accounted for significant deal value representing over 30% of total deal value.”
Some of the largest deals ever were seen in banking, cement, and aviation. In addition to consolidation, conglomerates’ forays into new industries, such as Adani’s entry into the cement and electronic media industries and Bandhan Bank’s entry into the asset management industry, drove this year’s M&As.
The largest housing finance business in India, HDFC Ltd, announced a merger with HDFC Bank in a $40 billion deal, establishing a financial services behemoth, in what can be regarded as the mother of all M&A deals. The year also saw the largest M&A transaction in the history of Indian civil aviation and the largest M&A deal worldwide since 2013. Enterprise value of the transaction was $8.9 billion.
“The merger of Tata’s Air India and Vistara would create the second largest airline in India (in terms of fleet size) with the largest international market share, and the second largest domestic market share. Combined entity would be the only Indian airline group to have both a full-service carrier and a low-cost carrier capturing market demand across segments,” the co-head of investment banking at BofA Merrill Lynch in India, Raj Balakrishnan, remarked Both the Air India-Vistara and HDFC transactions have BofA ML as the primary consultant.
Additionally, BofA assisted Actis in the $1.6 billion sale to Shell in April of its renewable energy platform Sprng. A lot of activity was also seen in the cement sector, starting with Adani’s $10.5 billion purchase of Holcim’s interest in Ambuja Cements and its subsidiary ACC Ltd. For an enterprise value of $5,666 crore, Dalmia Cement, a division of Dalmia Bharat, acquired the clinker, cement, and power assets of Jaiprakash Associates.
Mahesh Singhi, managing director, M&A focussed firm Singhi Advisors, said, “Apart from convergence or partnership between traditional brick and mortar businesses with tech-enabled platforms or forced mergers between new-age businesses or venture capital-backed tech firms with cash strapped unicorns, we foresee a series of such transactions where well-capitalized companies will be acquiring or merging with itself loss-making companies to enhance their platform and leverage the capabilities of the target companies.”
The beaten-down conventional industrial sectors, including metals, casting, forging, textiles, agro-processing, and commodity chemicals, would experience a fresh wave of consolidation to achieve scale in 2023, according to Singhi. As industrial organizations try to strengthen their balance sheets, Singhi said that the sale of non-core assets will be an interesting M&A subject to watch out for in 2023. JM Financial’s Dasgupta said, “Stressed assets through NCLT as well as GoI-led divestments would be another source of M&A deals in India to watch out for.”
In order to diversify their revenue streams, Singhi added, market leaders in highly competitive industries like auto components may move into new technology segments like IoT (Internet of Things), EV (electric vehicle) components, battery management, advanced materials, and adjacent industries like custom manufacturing.
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