Deal momentum further declines due to volatility in global markets

Delhi: According to Grant Thornton Bharat's Dealtracker report, while the world is still reeling with the aftereffects of the Russia-Ukraine war, in terms of global recessionary trends, the recent SVB collapse added further uncertainty. Moreover, 2023 saw a slow start for domestic players who were the driving force in the 2022 deal market, hence Q1 2023 recorded 332 deals valuing USD 9.7 billion, a 46% decline in volumes and a 35% decline in values.

Shanthi Vijetha, Partner- Growth at Grant Thornton Bharat, commented on the deal activity, saying, "Q1 2023 witnessed a significant decline in deals landscape compared to Q1 2022. The funding winter continued in Q1 2023 resulting in PE activity recording its lowest in the last eight quarters; the recent collapse of the SBV may have contributed to the same. Further, the global developments appear to have dampened the deal activity of the domestic players, however, it seems to be temporary as the pre-deal activity picked up in March/ April."

Mergers and acquisitions (M&A) landscape: The M&A activity recorded 76 deals worth USD 4.4 billion. This was 56% lower in volumes and a 21% decline in values over Q1 2022. The decline in deal volumes was majorly contributed by 62% fall in domestic activity, recording the third-lowest quarterly deal volumes for any given quarter since 2011, giving a slow start to 2023. The wait and watch approach around budget 2023 announcement added to the slowdown in the domestic activity. However, we expect the activity to go up given the favourable policy announcement. The start-up sector continued to lead the deal activity with 22% of the deals for the quarter (this was 71% lower over Q1 2022), recording only 17 deals valued at USD 69 million. IT and pharma sectors remained active, accounting for 28% of overall M&A volumes for the quarter. Driven by Jaypee Infratech's insolvency case led by Suraksha Realty, the real estate sector accounted for 55% of the quarter's values amounting to USD 2.5 billion, marking the highest recorded transaction in this sector in the last 12 years.

Private equity (PE) landscape: Continuing from H2 2022 when the funding winter set in, PE activity also witnessed a declining trend, by 42% (volumes) and 44% (values), recording 256 deals worth USD 5.3 billion. This was the lowest quarterly volumes and values recorded since Q4 2020. The start-up sector occupied the larger share of volumes with 60% of the deals. Driven by six high-value deals (valued at and above USD 100 million), e-commerce sector accounted for 30% of the quarter's deal values amounting to USD 1.3 billion. Q1 2023, saw the emergence of its most valuable homegrown fintech startup – Phonepe raising two funding of USD 350 million and USD 100 million each in Q1 2023. Additionally, the quarter also witnessed the largest ever series A raised by Insuretech company with InsuranceDekho raising USD 150 million led by a consortium of investors.

IPO and QIP landscape: Q1 2023 witnessed four IPO issues raising USD 84.4 million across manufacturing, infrastructure and automotive space compared to three issues raising USD 1 billion in Q1 2022 driven by Adani Wilmar Limited’s USD 486.5 million fundraise. On the other hand, QIP witnessed two fundraise, the first for SpiceJet’s cargo and logistics business worth USD 301 million, followed by Data Patterns QIP worth USD 60 million compared to four issues valued at USD 541 million in Q1 2022.