Narendra Modi-led BJP’s landslide victory in the May 2014 general elections ensured that India's fundraising pipeline...
Narendra Modi-led BJP’s landslide victory in the May 2014 general elections ensured that India’s fundraising pipeline, which had corroded for the last three years, was once again anointed. The underlying factor was the resurgence in business sentiment; the outcome was acceleration in fundraising by corporate houses and a significant increase in domestic and in-bound mergers and acquisitions (M&A) as well as private equity (PE) deals. Marquee transactions in M&A and PE space were the highlight of India’s capital markets in 2014. Sun Pharma’s acquisition of Ranbaxy, in a $3.2-billion all-stock deal, caught the Street by surprise. So did Kotak Mahindra Bank’s acquisition of ING Vysya Bank, which was valued at $2.5 billion. However, it was the IT and IT-enabled Services (ITeS) sectors that hogged the limelight. The three-way competition among Flipkart, Snapdeal and Amazon intensified into a larger, e-commerce war, and the need for additional equity with that. The three players saw a total infusion of more than $4.5-billion of investments from various VC and PE funds, showed a Dealtracker report by Grant Thornton, the sixth-largest American tax and business consultancy firm by fee income.
In all, M&A, PE deals in 2014 were valued at $48 billion (1,116 deals) compared to $38 billion (949 deals) and $43 billion (997 deals) in 2013 and 2012, respectively, stated the report.
Amazon chief Jeff Bezos long-term, $2-billion commitment to its Indian arm and Ratan Tata turning into an e-commerce investor and reportedly pumping $400 million into Snapdeal were some of the talking points. “A new trend that is emerging is angel investing and that’s slowly but surely becoming an active investment class that us backing entrepreneurs,” said Prashant Mehra, partner, Grant Thornton India LLP. “Given the current deal-making sentiment and momentum, we expect sharp increase in deal activity (both M&A and PE) across sectors especially, healthcare and pharma, IT/TES (especially, e-commerce) and financial services,” Mehra said.
Fundraising via institutional placement rose to R31,025.28 crore in calendar 2014, the highest in five-years. The likes of SBI (R8,032 crore), Reliance Communications (R4,800 crore), Idea Cellular (R3,000 crore) and Yes Bank (R2,942 crore) tapped the markets for reasons ranging from debt reduction and capital infusion to capital expenditure. Even first-timers showed encouraging signs as investors appetite grew with support from the rally in secondary markets. Even as funds raised by unlisted companies remained at a decade low of R1,527 crore, the issues saw multiple-times subscription. “The 2015 outlook remains bullish, even though a large section of the 2014 deals appeared to be the pipeline deals which were on the backburner and were revived due to change in sentiment. PE funds would continue to focus on exits and a robust IPO market and strong inbound deal interest is expected to help exits. Overall, India remains poised for a new level of economic growth in 2015. The reform process to keep the deal and growth momentum going is critical,” Mehra added.