India M&As back in action, up 14% in the first nine months of 2024

After a year of decline, mergers and acquisitions (M&As) in India increased 13.8 per cent, reaching $69.2 billion in the first nine months of 2024, as against $60.8 billion during the same period in 2023.

Led by Indian companies and private-equity (PE) firms, 2,301 transactions were signed between January and September this year as compared to 1,855 transactions reported in the same period last year, according to the Bloomberg data.

Bharti Airtel’s acquisition of stake in BT Group, a British telecom group, for $4.08 billion topped the table of M&A transactions this year so far. This was followed by the family settlement transaction in the Godrej family. Gujarat Gas’ acquisition of Gujarat State Petronet for $3 billion was the third-largest acquisition in the country.

 

Bhavin Shah, partner and leader (private equity and deals), PwC India, said compared to developed markets in North America and Europe, India’s market size and growth potential were more attractive to investors and hence the rise in deals.

“High gross domestic product growth rates and a robust stock market led to higher valuations in India,” said Shah.

Additionally, fluctuations in interest rates and inflation influence the cost of capital and borrowing, requiring adjustment in financing terms, equity stakes, and risk-sharing arrangements, which, in turn, affect valuations. Cross-border transactions have also been impacted by changes in real exchange rates.

Vishal Agarwal, partner, Grant Thornton Bharat, said different parts of the world appeared to be behaving differently. West Asia has emerged as a major attraction of foreign investment and is focused on attracting capital.

“The West seems to be shying away from China, though the Middle East continues to invest there,” he said.

Valuations and returns in developed markets have gone up, which makes investing based on risk-adjusted return more interesting than in developing markets like India, where the existing valuation multiples are high and the return is expected further down the line.

“Investors continue to feel that the Indian market is well priced. There seems to be an interest in early-stage deals and full buyouts where promoters are not willing to stay until initial public offerings (IPOs). Most growth-sized deals are being evaluated for IPO rather than PE funds because the latter are seen as more expensive,” Agarwal said.

Private-equity funds have emerged as an important segment of M&As with funds buying and selling shares worth $24.2 billion in the first nine months of 2024, up 8.9 per cent over the same period last year.