India Inc goes on M&A spree despite Covid, health a key focus area in 2021

BPCL, Air India, airport acquisitions to dominate headlines in New Year

Indian conglomerates bought and sold companies in record breaking deals despite a majority of smaller firms ending the year on a somber note. Barring a few top companies, which saw a phenomenal rise in their market valuation, the rest of corporate India is ending 2020 with battered sales and profits due to the Corona pandemic.

But the year 2020 will be remembered for the billions of dollars’ worth of investments reported by Reliance Industries by selling stake in its telecom services arm, Jio Platforms. As soon as the Mukesh Ambani-led firm stopped selling stakes in Jio, global investors queued up to invest in its organised retail arm, making the company virtually debt-free. 

Backed by billions of dollars of investments from marque global investors, Ambani then acquired Future group’s entire retail and wholesale business for Rs 25,000 crore, giving the group a significant lead in organised retail. 

The Future transaction is now pending due to litigation initiated by RIL’s rival, Amazon in the courts but the company expects to close the deal in the new year. During the year, RIL also sold its stake in its telecom tower company to Brookfield and optic fibre assets to InvITs -- thus reducing significant debt on its books.

Of the $33.4 billion of fund raising initiatives announced since April this year, RIL has already received around $23.6 billion while another $9.8 billion is expected to be received over the next few quarters.  “Proceeds from any further asset monetisation will accumulate on the balance sheet, thereby strengthening its capital structure and enhancing its financial flexibility. Consequently, credit metrics will remain strongly positioned for its current Baa2 (high) rating over the next 12-18 months," says a Moody’s analyst. 

 

While Ambani is now focusing on consolidating his empire in 2020, Gautam Adani, chairman of the Adani group, was busy setting up new businesses during the year. The group invested on picking up six airports after an auction by the government, and acquiring the debt of GVK in Mumbai airport. The group is also investing heavily in renewable energy in a big way and is expecting electricity prices to fall substantially as more renewable power is supplied to the grid. 

“We are now accelerating towards achieving a generation capacity of 25 Gw of renewable power by 2025, and thereafter becoming the world’s largest renewable company by 2030," Adani said in a recent summit in Singapore. With the Indian government planning to auction more airports in 2021, the group plans to participate in the bidding process.

The Tata group, meanwhile, is expecting to start the new year with big bang acquisitions of Air India, online retailer, Big Basket and Cafe Coffee Day. This will be apart from Tata Sons increasing its stake in Air Asia India.  Meanwhile, A bitter legal dispute with its former chairman and Tata Sons shareholder, Cyrus Mistry is also expected to end with the Supreme Court pronouncing its judgement in the new year. “It will be the beginning of a new chapter in 2021 and we can expect a bigger role for Noel Tata, half-brother of patriarch Ratan Tata, in the group," said a Tata insider.

The Aditya Birla Group, which is struggling with its telecom venture, is also expected to make way for distressed funds to buy stakes in Vodafone Idea Ltd where it made huge losses. At the same time, while the Jindal group ended the year waiting for approvals to acquire Bhushan Power and Steel for Rs 19,700 crore, the Vedanta group put in a bid for Bharat Petroleum that will cost it as much as Rs 50,000 crore in the new year if its bid succeeds. 

"In the new year, we can expect top groups to make big time investments in the healthcare and wellness segment which remained unaffected during the pandemic," said a CEO of a healthcare firm.

"It’s the future."