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E-commerce, start-up and IT sector drive overall deal values in Q1 2022

Delhi: Geopolitical events, followed by depreciation of the rupee against USD and supply-chain disruptions across industries, has added to the existing worries on tightening of liquidity by global central banks amid rising inflation. However, despite the global shakedown, India remained optimistic as the COVID-19 conditions seemingly firmed and both the manufacturing and services PMIs ticked up in Q1 2022. According to Grant Thornton Bharat’s Dealtracker report for Q1 2022, India Inc. recorded 608 deals worth USD 13.3 billion, up from 408 deals worth USD 12.1 billion recorded in Q1 2021. This translates to a significant 49% growth in the deal volumes and 9% increase in values compared to January- March period of 2021.

Commenting on the deal activity, Shanthi Vijetha, Partner- Growth at Grant Thornton Bharat said, “Despite headwinds from the pandemic and other uncertainties, deal makers in India are notably optimistic about the prospects for a stronger economy in the current year and therefore, we expect the momentum of deal activity to continue in the coming months of 2022. In particular, demand for new technological capabilities and underlying innovation is anticipated to grow. This is likely to drive M&A deal-making. The start-up ecosystem is expected to continue strong in 2022, fuelled by PE activity, with more new-age companies becoming unicorns.”

M&A Landscape: Q1 2022 saw 167 M&A deals valued at USD 3.9 billion. Deal volumes witnessed a significant 53% increase in deal volumes compared to Q1 2021 driven by 64% increase in the domestic deal volumes. While the volumes jumped more than half, the valued dropped by 46% as Q1 2021 witnessed two deals valued over billion dollars aggregating to USD 3.9 while 2022 did not. The drop in the values were also due to around 70% of deals with undisclosed deal values.  Top 10 deals accounting for 6% of M&A deal volumes, constituted 60% of the total M&A deal values in Q1 2022. Driven by Google’s USD 700 million acquisition of 1.28% stake in Bharti Airtel, the telecom sector accounted for 18% of the M&A value, for Q1 2022.

Private equity (PE) Landscape: PE investments drove deal values in Q1 2022 with 441 deals valued at USD 9.4 billion, highest number of deals recorded in the opening quarter of any given year. This translated to a significant 92% increase in the deal values and 47% growth in deal volumes compared with the same period last year. The uptrend in the deal activity was on the back of 25 high-value investments valued at and over USD 100 million and 99 deals valued between USD 10 – 99 million, compared to only 13 and 65 such deals, respectively, witnessed in Q1 2021. Driven by 10 high-value investments of at and over USD 100 million, e-commerce sector led the investment values capturing 34% of PE values during Q1 2022 garnering investments worth USD 3.2 billion across 60 deals. The quarter also witnessed the emergence of 11 unicorns across tech-savvy sectors compared to only two unicorns created in Q1 2021.

Start-up landscape: Start-ups, e-commerce and IT sectors led the deal activity in Q1 2022 together recording 479 deals valued at USD 8.5 billion. This is 79% of overall deal volumes and 64% of deal values. With 35% of M&A deal volumes, the start-up sector continued to dominate M&A deal activity with 58 deals valued at USD 567 million in Q1 2022. On the PE front, Q1 2022 recorded 283 investments in the start-up sector with investments worth USD 2.9 billion leading the PE sector. Retail tech, fin tech, enterprise application infrastructure, edtech and health tech segments remained active during the quarter witnessing increased deals.