BS Number Wise: Indian deal-making enters the slow lane, shows data

A worldwide trend may have just marked its presence in India this month when Dutch investor Prosus called off its $4.7-billion acquisition of Indian financial technology firm BillDesk.
 

There is less money for companies as buyers slow down transactions amid geopolitical tension and higher capital cost.

The September quarter had just under $1 trillion worth of global deals: the first time since early 2020 that the value of transactions fell below that mark. Lower global interest rates to limit the economic impact of Covid-19 had spurred mergers and acquisitions worldwide after a slowdown in early 2020.
 

Interest rates have increased since then and the world now has to deal with Russia’s war in the Ukraine. The total value of global transactions dropped 46 per cent year-on-year in the September quarter, shows an analysis of Bloomberg data (chart 1).


 

Prosus terminated the BillDesk deal saying that certain conditions had not been met. As large as the failed agreement was, India has done better in deal-making with only a 16 per cent decline in the September quarter over last year, or less than half of the global figure. India’s emerging market peers in the Asia Pacific region saw a 33.3 per cent decline in deal value during this period (chart 2).


 

India’s resilience may well have to do with broader macroeconomic factors. It is expected to grow at 6.8 per cent in 2022, compared to 3.2 per cent for the world; according to the International Monetary Fund (IMF).
 

Sectoral analysis shows that Indian industrial, non-cyclical consumer and financial segments saw significant deal-making. Each had a cumulative deal value of over $5 billion in September 2022. Technology company deals have taken a hit (chart 3).


 

While the numbers suggest that deal-making is holding up better in India, investors and companies may well have become more selective about deploying capital.