Blockbuster M&As keep India's deal street buzzing despite market volatility

With deals crossing $105 bn in the first 4 months, experts believe 2022 could be a record year for M&As

India's deal street is buzzing yet again despite indices remaining volatile across the globe. Several blockbuster deals like Reliance Industries’ (RIL) potential $10-billion (Rs 76,000 crore) acquisition of European medicine chain Walgreens Boots; Adani and JSW groups bidding for Ambuja Cements and the merger of the HDFC twins are leading the merger and acquisitions (M&A) pecking order.

In the first four months of 2022 (till April 28), M&A deals, and deals in the making, have already crossed $105 billion, compared to $44.2 billion in the first four months of 2021. In 2021, Indian companies reported M&A deals worth $149.4 billion — its highest ever — up 31.2 per cent over 2020, according to statistics collated by Bloomberg.

According to a number of bankers, 2022 will be the best year for M&As.

Experts say there is a spurt in consolidation across industry verticals as seen in the mergers of HDFC and HDFC Bank, and multiplex operators PVR and Inox as cash-rich companies pick up rivals at attractive valuations. 

“There has also been a significant positive traction through the first quarter (of calendar year 2022). With most corporates moving back to pre-Covid level of operations, more physical meetings are taking place and the deals are concluding faster with less fatigue and as a result, the traction is hot,"' said Aparajit Bhattacharya, Partner, DSK Legal, a leading corporate law firm.

The appetite for global conglomerates to enter India across industry verticals by buying local companies has regained significant steam, including various multi-billion dollar joint ventures being announced in untapped sectors like round-the-clock solar (RTC), battery storage, green hydrogen, to name a few.  At the same time, Indian companies like RIL are tying up with Apollo Global to acquire Boots, the Financial Times reported on Wednesday.

Pre-initial public offering (IPO) deals have also been on the rise, leading to significant M&A transactions. “‘Consolidation and leveraging collective strengths have become the new norm (and rightly so). The market is buoyant, with the hope that 2022 will turn out to be better than 2021,” Bhattacharya said.

Bankers said all eyes are currently on the sale of Ambuja Cements and its subsidiary, ACC, by its Swiss promoter Holcim which would see bidders spend as much as Rs 76,000 crore to acquire the companies. “Almost all top investment banks are advising their clients on structuring transactions and tax planning. As the sale will be on a bidding basis, there is no upper ceiling on investment,” said a banker close to the transaction. The Adani group is leading the race while the JSW group is also in the fray. Radhakishan Damani has also offered funds as a financial investor.

"Both conglomerates are tying up funds to make the bid. Some bidders may make an offer only for Ambuja or ACC,” said a banker asking not to be quoted. Earlier this month, the Adani group raised Rs 15,400 crore) by selling stakes in three group companies to UAE's International Holding Company (IHC).

The chief executive officer (CEO) of a large financial company said several deals are in the making in non-banking finance companies (NBFCs) as firms are trying to sell part of their businesses to reduce debt. Tata Motors Finance is in talks with State Bank of India to sell its vehicle portfolio worth Rs 14,500 crore, which would reduce consolidated debt of its parent, Tata Motors, said a banker, adding that at least two NBFCs are currently on sale.