Invest in India is the mantra for lot of multinationals since India’s GDP size to cross $3 trillion in five years in 2019. This year India is set to become a $2 trillion economy. Currently India is the tenth largest economy in the world. Improving GDP will make India seventh largest economy in 2019 as per IMF’s latest world economic outlook.
A sharp increase in M&A activity in India since the new government assumed office in May 2014. 19% increase in value and 12% in volume over 2013, it is a positive trend this year, the activity of M&A has jumped 16.5%. As per a recent study by Thomson Reuters, the value of announced M&A deals involving India businesses reached $26.1 billion during the same period.
At $11.1 billion, domestic M&A was up 206.6% over a year ago and average deal size (disclosed values) of $75.2 million vs. last year $63.1 million. Healthcare sector has seen the massive M&A activities with total value of $6.1 billion (23.4% share of M&A).
A Grant Thornton study indicates energy and natural resources sector has been active this year with 25 deals aggregating $4.1 billion so far. Though IT and ITES companies continue to top the charts both in M&A and PE space.
Competition Commission of India suggested recently that fair trade regulator has seen steady increase in receiving an average of 10 notices a month since May 2014 for seeking approval for M&A deals vs. average 2 notices in 2013. The informal guidance requests by law firms and companies have also increased reflecting the confidence in economy and future growth in India.
Technology sector is showing sharp increase in M&A league tables, reflecting a strong focus on services and solutions around Healthcare, IT, Pharmaceuticals, Medical, Biotech and Consumer industries.
The global businesses are trying to increase their share in India market. This is just a beginning as growth picks; interest rates will go down and more tax clarity will only help to further fuel this kind of activities.
There is a lot of interest from medium sized global companies to enter into India while acquiring/ share of local companies. Domestic big companies are also using the market sentiment to further grow their shares of the market via acquiring right fit companies and also diversifying.
In August, the government announced relaxation in foreign direct investment (FDI) norms in many sectors including multi-brand retail and telecom. There is inherent macro-economic pressure and heavy debt pile for some large domestic companies and which are looking to divest non-core businesses. This has created a large opportunity for global companies vying for a greater role in Indian market.