by Elton Gomes
India might be looking at its biggest boom in mergers and acquisitions deals, after transactions involving Indian companies witnessed a massive surge. Investment bankers are already preparing for more dealmaking in the future.
According to data compiled by Bloomberg, transactions involving Indian companies have reached $104.5 billion in 2018. The figure thrashed 2017’s record with almost four months left in the year.
In 2017, India witnessed more than 1,000 mergers and acquisitions (M&As), the highest in the current decade. The dealmaking took place after 2017 was a record year in terms of raising equity. The year 2017 saw a total of Rs 1,81,605 crore being raised, and prospects for 2018 looked good from the start. The total number of initial public offerings (IPOs) in March and M&As surpassed the corresponding numbers in January-February 2017.
Dealmaking in India
India had a great year in 2018 in terms of mergers and acquisitions in 2018, and the same trend could continue till 2019. The total amount for transactions involving Indian companies is expected to cross $100 billion again in 2019, said Sanjeev Krishan, a Gurgaon-based partner at PwC India, Bloomberg Quint reported.
Vodafone India and Idea Cellular recently completed a merger that could create India’s largest telecom company. The top two wireless carriers merged operations in an attempt to topple Reliance Jio’s grip over the market. The deal was reportedly worth $23 billion.
The deal that made headlines around the world was Flipkart’s stake sale to Walmart. US retail giant Walmart Inc picked up a 77 percent stake in India’s largest online retailer Flipkart for $16 billion. The deal was India’s largest acquisition and the world’s biggest purchase of an ecommerce company. A total of $2 billion of fresh investment was included as Walmart took a giant step towards taking on its rival Amazon.
The transaction also resulted in the largest exit for private equity and venture capital investors in India, who are slated to collectively make about $14 billion by selling shares to Walmart.
Why is India such a favourable market
The combination of a new bankruptcy law, a race for dominance in the steadily growing Indian e-commerce industry, and a record war chest at private equity funds has resulted in the creation of an unheard of opportunity for dealmaking in India, the world’s fastest-growing major economy. This surge of transactions is also helping the Indian financial rid itself of bad debt, and it is helping India in modernizing a retail sector that serves 1 billion people.
India’s consumer market is expected to grow
Another favourable outcome for mergers and acquisition deals is India’s consumer sector. Walmart’s acquisition of Flipkart was the biggest ever takeover by a foreign buyer in India. Amazon.com Inc., Alibaba Group Holding Ltd., and Tencent Holdings Ltd. are also investing in local companies to expand their presence in India. Warren Buffett recently said he would be investing in India’s Paytm.
Morgan Stanley estimates that annual spending by India’s online shoppers may increase more than sixfold to $200 billion in about a decade, given the ubiquity of smartphones and affordable data plans. India’s consumer market is “the next big battlefield, and strategics recognize that,” said Gaurav Mehta, the Mumbai-based country head at Raine Group LLC, Bloomberg Quint reported. PwC’s Sanjeev Krishan certainly seems optimistic about 2019. He told Bloomberg Quint, “We expect 2018 to be a blockbuster year for M&A. Many of the deal drivers visible currently are expected to continue next year.”
Elton Gomes is a staff writer at Qrius.