Dealtracker – Annual edition 2014

Welcome to the 10th annual edition of Dealtracker one of our flagship publications that captures and analyses M&A and PE deal data. It is the principal source of information on deal activity for the Indian market. With your constant support and encouragement, we are happy to present the annual edition that gives our readers an insight into M&A dealmaking, PE investments and sector trends among others.

Although we saw a slow start to the year, the second quarter onwards we witnessed a deal resurgence in India Inc based on expectations of economic revival after the election. The trend gained further momentum post the election of the new Government at the centre and we closed the year with over 1,177 deals, the highest ever in a decade, worth over USD 50 billion. M&A contributed close to USD 38 billion from 573 deals with PE contributing USD 12 billion from 604 deals.

Domestic and Inbound deals have been the highlight in 2014 as we see global players betting on the revival of India growth story or consolidating their holdings in Indian subsidiaries. Domestic M&A deals are largely riding on the consolidation wave with Sun Pharma acquiring Ranbaxy, Kotak merging with ING Vysya, Flipkart looping in Myntra and a few large power sector mergers and acquisitions. Another key driver behind deals was overleveraged companies finding ways to cut debt or companies hiving off non core businesses or assets. These underlying drivers coupled with the rebounding market indices post the decisive outcome in the elections, paved the way for a slew of deal closures in the second half of the year.

PE has been steady in terms of values, however the volumes have touched on all time high in a decade with close to 604 deals in the year totaling USD 12 billion of investments. Key sectors that contributed to M&A activity were IT/ITES, Pharma, Retail & Consumer, BFSI, Energy and Telecom. IT/ITES continues to dominate volumes and will continue to do so whilst values will be driven by core sectors of the economy.

In the PE arena, the IT/ITES sector hogged the limelight with the e-commerce segment alone contributing over 30% of total deal values. Other sectors that saw a lot of action were real estate and infrastructure and BFSI. The intense competition among Flipkart, Snapdeal and Amazon and their expansion strategy will keep stakeholders on the edge of their seats in 2015.

The year also saw several PE players cashing in on exits from investments – notably the Bain-Hero Motocorp, ChryCapital-HCL and Intas exit- which is a welcome change for long term investors who have ploughed close to USD 90 billion over the last decade in Indian companies. The investment window of 5-8 years has already passed for several of the investments and exits are overdue. Hence, the exit market is only expected to go up with capital market recovery and a strong inbound interest coupled with improved business sentiments driving fundamental operational metrics. The year saw a peak in both number of QIPs and money raised, clearly making QIP the most preferred route to raise funds in the capital market in 2014.

On the regulatory front, a big impetus came from the government to relax norms for some cash strapped sectors such as real estate and construction. The FDI policy in defence sector has been liberalised, 100% FDI under automatic route has been permitted in construction, operation and maintenance in specified rail infrastructure projects, and of course the much awaited relaxation of norms in the insurance sector and the medical devices space. These sectors are clearly expected to see a surge in inflows in 2015. In addition, SEBI is working on improving the environment in the capital market which should see further reforms going forward.

2014 was important in many aspects for India Inc. We expect 2015 to see significant growth in the economy driven by a combination of a stable government, dipping commodity prices and significant reforms all of which would drive deal activity. We wish you all the best and hope to garner your continued support in the years to come. I will end my message with the same hope that I have had since we launched Dealtracker which is that I hope there is an active market for control which translates into hostile deals happening in 2015.. I am sure that this hope of mine will be realised soon as it would bring significant benefits to the Indian capital market and improve governance standards.

Please send us a mail at contact@in.gt.com for a copy of the report.