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India's M&A and Deal Making Outlook 2024 We anticipate that investors will adopt a more cautious approach and undertake robust price discovery measures before agreeing valuations – nevertheless, we expect valuations to remain high and on an upward trajectory for certain key sectors, such as clean energy and healthcare

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In keeping with global trends, dealmaking and M&A activity in India witnessed a drop in volume in the year 2023. The post-covid resurgence in deal activity, which was prevalent through 2021 and the early part of 2022, slowed down towards the latter part of 2022, and this trend continued into 2023. However, as the year drew to a close there was perceptible excitement about the prospects for the coming year, generally for global M&A - and for India in particular. While the decreased deal volumes in 2023 largely had to do with global headwinds (high interest rates, geopolitical tensions and recession fears being the critical ones), India, relative to other markets, showed notable resilience.

As we move into the new year, together with global trends and other factors specific to the M&A landscape, it is this general overall positive outlook on the Indian economy (which has also been echoed globally by financial institutions, investment bankers, consultants and other experts), which we expect will set the tone for dealmaking in India in 2024.

KEY FACTORS AND EXPECTED TRENDS

Global Uptick, Excess Dry Powder As is generally the case in periods following a phase of relatively low activity, it is expected that globally, there will be considerable funds available with the traditional key players – private equity and venture capital funds, sovereign wealth funds and certain large corporates. We have noticed an increasing interest in India from sovereign wealth funds in the recent past, particularly in certain focus sectors – a trend we expect to see continue, especially for large ticket size deals, where they partner with private equity funds and large corporates. Large corporates and private equity portfolio companies will also see consolidation and diversification transactions to de-lever the corporate debt accumulated during the recent debt drought and to focus on core sectors / activities. Venture capital tap will open again, but with a focus on profitability and positive bottom lines – a key consideration for all private equity investments.

FOCUS SECTORS

We expect significant deal activity in healthcare (life sciences, pharmaceuticals and services) and clean energy to continue. In addition, we expect deal activity in TMT (especially, technology enabled services and AI), manufacturing and FMCG to gain momentum. The sustained push from the government on fast infrastructure development is expected to carry on into the new year – the sector witnessed some interesting large ticket deals last year (in airports, natural gas etc.) and will see more activity going forward.

ROBUST PRICE DISCOVERY

Optimistic valuations and the related volatility was a common theme during the peak in 2021- 2022, particularly in technology / internet based businesses. A key contributing factor to this was the increased number of options available to Indian promoters amidst the deal surge – and considerable dry powder chasing such investments. Although, we anticipate that investors will adopt a more cautious approach and undertake robust price discovery measures before agreeing valuations – nevertheless, we expect valuations to remain high and on an upward trajectory for certain key sectors, such as clean energy and healthcare.

Iqbal Khanpartner & Ashid Basheer

Iqbal Khanpartner, General Corporate & Ashid Basheer, principal Associate, General Corporate, Shardul Amarchand Mangaldas & C O

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