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India M&A

Latest update: 9 January 2021

Indian M&A activity remained strong in 2020 as it recorded its second highest deal value since 2013 despite uncertainties and disruptions related to the COVID-19 pandemic, border tensions, the US presidential election and economic slowdown. Reliance Group has been a major driving force behind Indian M&A dealmaking. Reliance Jio secured USD 20bn in global private equity investments while Reliance Retail raised USD 6.4bn and bought the retail business of Future Group for USD 3.8bn.

Key Data Points

  • The overall deal making in India during 2020 recorded as USD 82.3bn across 382 deals showing a year-on-year increase of 22.9% in terms of deal value despite a decrease of 17.1% in deal count compared with 2019 (USD 66.9bn across 461 deals).
  • Meanwhile, Inbound activity recorded its highest deal value since 2013 – USD 49.1bn across 185 deals – equal to a 30.3% increase in deal value but a decline of 23.5% in deal count compared to 2019 (USD 37.7bn across 242 deals). Telecom and Consumer sectors were the most active in terms of deal value in 2020. Major inbound deals in 4Q20 were Blackstone’s acquisition of Piramal Glass for USD 1bn and the acquisition of a 13% stake in PhonePe by Walmart and other investors for USD 700m. The biggest inbound deal in 2020 was the acquisition of a 9.9% stake in Jio by Facebook for USD 5.7bn.
  • Domestic deal value rose year-on-year by 13.5% to USD 33.2bn in 2020 despite a 10% decrease in deal count (197 deals) over the same period. Outbound M&A activity declined by 13% in deal value to USD 1.76bn (across 54 deals) in 2020 compared to USD 2.03bn in 2019 (across 55 deals). The largest domestic deal in 4Q20 was the merger of Jindal Stainless Limited (JSL), an India-listed stainless-steel manufacturer, with its listed holding company Jindal Stainless (Hisar) Ltd (JSHL), through a share swap scheme of amalgamation.
  • PE buyout activity during 2020 rose by 15.4% in deal value (USD 19.83bn across 117 deals) in 2020 compared to a year before (USD 17.18bn across 134 deals). This increase was largely due to a surge in the Telecom sector, which generated no private equity buyout deals in 2019 but recorded eight private equity buyout transactions worth a combined USD 6.4bn in 2020. Consumer, Pharma, Transport and Media sectors also increased by more than 100% in deal value in 2020 despite recording a number of transactions similar to that of 2019.

Private equity exits reported their lowest deal value and deals (USD 5.15bn, 36 deals) in 2020 since 2015, while deal value declined by 28.2 % compared to 2019 (USD 7.17bn, 49 deals). Transport and Construction sectors combined accounted for 65.4% of total exits deal value (USD 5.15bn) in 2020.

Key Themes

  • M&A dealmaking recovered in the second half of 2020 as the COVID-19 pandemic eased and it is expected to remain strong in 2021 as a result of the rollout of vaccination programs, supportive measures from the government, inexpensive financing and rise of special purpose acquisition companies (SPACs).
  • The US was the largest foreign investor in India recording USD 28.1bn across 75 deals – which accounted for 34.1% in total outbound deal value and 19.6% in deal count. Japan ranked as second largest investor by value with USD 1.35bn, 9 deals followed by United Kingdom with USD 1.04bn and 11 deals.
  • The pandemic led to a widescale increase of ecommerce businesses’ popularity among consumers – a trend that might spur investment into Indian logistics and warehousing sectors. In December, Singapore’s sovereign wealth fund GIC and Hong Kong-based logistics real estate firm ESR Cayman have entered into a strategic partnership to establish a USD 750m joint venture to develop and acquire industrial and logistics assets in India, which will be 80% held by GIC and 20% by ESR Cayman. Meanwhile, Pallonji Real Estate is reportedly in talks to set up a USD 600m investment platform in partnership with a global sovereign fund to enter India’s warehousing space. In addition, companies such as Reliance Industries, Tata Group, Mahindra Logistics and TVS Logistics could enter logistics and warehousing businesses either by partnership or through the acquisition of regional players. Retail giants such as Walmart and Amazon are strengthening supply and delivery chain in India rural areas.
  • In the second half of 2020, IPO activity gained momentum as market sentiment improved. Major expected listings in 2021 include Kalyan Jewellers, Indigo Paints, Indian Railway Finance Corporation, and Barbeque Nation. Apart from the expected IPOs, Blackstone is looking to exit from listed technology firm Mphasis, in which it acquired a majority stake from Hewlett Packard Enterprise in 2016.
  • Healthcare, renewables, pharmaceuticals and specialty chemicals and ecommerce segments might continue to attract investment in first half of the 2021. However, sectors such as aviation, hospitality, tourism and multiplexes are not expected to recover soon.

Top Deals

Announcement date
Target company
Target dominant sector
Bidder company
Seller company
Deal value (US$m)
22-Apr-20
Jio Platforms Limited (9.99% Stake)
Telecommunications: Carriers
Facebook, Inc.
-
5,708
15-Jul-20
Jio Platforms Limited (7.73% Stake)
Telecommunications: Carriers
Google LLC
-
4,487
29-Aug-20
Future Group - Retail & Wholesale Business; Future Group - Logistics & Warehousing Business
Consumer: Retail
Reliance Retail Ventures Limited
Future Group
3,386
02-Jul-20
Samvardhana Motherson International Limited
Automotive
Motherson Sumi Systems Limited
Sehgal family - India
3,083
09-Jun-20
Aircel Limited
Telecommunications: Carriers
UV Asset Reconstruction Company Limited ; Aircel Limited (Financial Creditors)
-
2,607


by Veena Dontul

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