Indian M&A skyrocketed in FY22, shattering records and bucking the trend seen across Asia-Pacific, EMEA and the Americas. India was the only Asia-Pacific country among the top five to post higher deal value than in FY21. While the other four nations – China, Australia, Japan and South Korea – saw deal value tumble by an average of 38% year-on-year, India’s total soared a remarkable 69% to USD 182bn across 1,217 transactions, surging past its previous value high-water mark and ranking fifth by deal count.
Home is where the heart is
Domestic appetite played a major role in India’s 2022 M&A boom, ballooning 101% from FY21 to USD 159bn, led by Indian majors HDFC [NSE:HDFCBANK], Reliance Industries [NSE:RELIANCE], Adani Enterprises [NSE:ADANIENT] and Bharti Airtel [NSE:BHARTIARTL], which bolstered domestic capabilities via acquisitions in finance, telecoms and construction/building. All three sectors were among the top five to attract domestic M&A capital, as well as technology, which saw the largest number of deals (355), and healthcare (81). Robust corporate earnings and available cash balances for large deals proved key draws among targets, while India’s resilient growth story contributed to the acquisition frenzy.
Sponsors steady, but exits up
Financial sponsors continued to splash the cash in India in FY22, shelling out USD 17bn, broadly on par with FY20 and FY21, as the country’s growth story reeled in titans such as KKR [NYSE:KKR], TPG Capital, Temasek Holdings, Advent International and Singapore’s GIC. The top target sectors for sponsors by value and deal count were healthcare (USD 5.6bn) and technology (13), respectively.
Foremost among healthcare targets were clinics and pharmaceuticals, with smaller deals in genetics, instruments and products. Note that the top two majority stake deals are still pending: KKR’s USD 2.1bn tie-up with Manipal Health Enterprises and Advent International’s USD 1.1bn swoop for Suven Pharmaceuticals [NSE:SUVENPHAR]. In the technology space, software firms dominated interest, including online educator Think & Learn; the parent of online food delivery firm Swiggy, Bundl Technologies, which was an active M&A participant both as a buyer and a target; and Home Interior Designs E-Commerce, the parent of home décor company, Livspace.
Exits spiked to almost USD 10bn, up from a five-year average of USD 4bn per year, and were largely on par with 2021. Deals in healthcare were a key driver of exits, including KKR’s aforementioned pending USD 2.1bn purchase of a 47.5% stake in Manipal Health Enterprises from Temasek Holdings and TPG Capital, as well as KKR’s USD 1.1bn sale of its stake in Max Healthcare Institute to a clutch of investors including GIC and BNP Paribas. Exits are expected to continue throughout 2023, particularly in healthcare, technology and professional services, as sponsors seek to capitalize on a climate of high valuations and suitor appetite among other financial sponsors and strategic players.
New year, new opportunities
While India may not rack up another USD 182bn in M&A value in 2023, activity is expected to remain high on the back of strong fundamentals, robust corporates, and hefty earnings potential. There is already a swollen pipeline of activity building up. Overseas stakeholders such as Netherlands-based bank ING [AMS:INGA] could acquire a controlling interest in Mumbai-based lender IDBI Bank [BOM:500116], while Hong Kong-headquartered GAW Capital Partners and Singapore-based CapitaLand Investment are in a race to buy a majority holding in Bengaluru’s renewable energy player, CleanMax Enviro Energy Solutions, according to local media reports.
Activity on the domestic front is again likely to be intense. Adani Group could participate in upcoming auctions of domestic airports, Mint Daily reports, while Bengaluru-headquartered hospital chain Manipal Health Enterprises’ existing backer, Singapore-based Temasek Holdings will buy an additional 33% stake for USD 1.6bn, according to The Economic Times. In addition, Power Finance Corp [BOM:532810], Power Grid Corporation of India [BOM:532898], NHPC [BOM:533098], NTPC [NSE:NTPC], and Damodar Valley Corp could sell their combined estimated 20% stake in PTC India [NSE:PTC], per The Economic Times.