The first quarter of this calendar year saw a significant year-on-year decline in both volume and deal value of deals, according to a report by Grant Thornton Bharat. There were 332 deals valued at $9.7 billion, a 46 percent decline in volume and a 35 percent decline in value, the report showed.

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Following the Russia- Ukraine war, the recent collapse of SVB Bank added further uncertainty amid global recessionary trends.

Despite this, March saw 98 deals amounting to $5.2 billion, a 46 percent decline in volume but an 18 percent increase in value owing to one marquee insolvency transaction — Suraksha Realty’s acquisition of Jaypee Infratech for $2.5 billion.

According to Prashant Mehra, a partner at Grant Thornton Bharat, the sentiment around the world has been quite lackluster, with both values and volumes experiencing a 35-40 percent decline compared to last year.

He said, “I think what's happened in the first quarter of this calendar year is something that was really expected. The sentiment across the globe has been very tepid, which is why we have seen about 35 to 40 percent low last year both in terms of values and volumes.”

Mehra added, “Large deals happening in the first quarter of last year has made this percentage even higher. But yes, just focusing on volumes itself it is about a 30-35 percent de-growth.’

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Mergers & Acquisition (M&A) scenario

In the M&A section, 76 deals worth $4.4 billion were recorded. This was 56 percent lower in YOY volumes and a 21 percent decline in values over Q1 2022.

The decline in deal volumes was majorly contributed by 62 percent fall in domestic activity, recording the third-lowest quarterly deal volumes for any given quarter since 2011 on back of the wait and watch approach around budget 2023 announcement.

The start-up sector continued to lead the deal activity with 22 percent of the deals, followed by the IT and pharma sectors accounting for 28 percent of overall M&A volumes for the quarter, according to the Grant Thornton report.

Driven by Jaypee Infratech’s acquisition by Suraksha Realty, the real estate sector accounted for 55 percent of the quarter’s values amounting to $2.5 billion.

Mehra mentioned that it is encouraging to see that deals in both M&A and private equity are spread out across different sectors, including industrial, pharma, and real estate. While private equity has typically focused on the technology sector, this diversification is a positive development.

He stated that there is no one sector that stands out as a clear favorite, the deals are across. The fact that deals are happening across sectors shows that the market is still interested in transactions, but weak sentiment means it's a wait-and-watch situation.

PE activity also witnessed a declining trend, by 42 percent (volumes) and 44 percent (values), recording 256 deals worth $5.3 billion. The start-up sector occupied the larger share of volumes with 60 percent of the deals followed by investment in e-commerce and IT sectors. Driven by four high-value deals (valued at and above $100 million), e-commerce sector accounted for 30 percent of the quarter's deal values amounting to $1.3 billion.

However, signs of pre-deal activity in late March or early April suggest a turning point, and hopefully, the market will improve in the next few months.

Regarding block deals, it's uncertain whether they will continue because buying is more appropriate when valuations are low, rather than selling, said Mehra.

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With India's growth potential and the current tepid and wait-and-watch global environment, the markets are expected to turn around in a quarter or so.

Afterward, IPOs will return, and people will focus on investing more money rather than monetising existing investments. Action is expected to pick up in June, and growth is expected to exceed last year's levels starting in July.

(Edited by : Pradeep John)