JPMorgan Chase & Co has forecasted that dealmakers in India should anticipate another robust year for mergers and acquisitions, as companies may seek to diversify into the South Asian nation due to geopolitical tensions.
India experienced a record-breaking year in terms of mergers and acquisitions (M&A) in 2022, with transactions worth $191 billion, according to Bloomberg data. This was a stark contrast to the global decline in deal activity. Although a repeat of such a high mark in 2023 is unlikely, there will still be a decent amount of deal flow to keep bankers busy, according to Nitin Maheshwari, JPMorgan’s head of M&A for India.
Maheshwari stated in an interview that China has been difficult to deploy capital in, leaving other countries such as Australia and Japan as competitive options. He also added that more capital will continue to flow into India, which is the largest market for some global sponsors. India’s fast-growing economy has made it a big bet for global financial firms, despite recent troubles at billionaire Gautam Adani’s business empire affecting its allure. In contrast, China has struggled to attract capital due to its protracted Covid Zero policy and crackdown on private enterprises, including its biggest tech firms, resulting in a stagnant economy in recent years.
Maheshwari predicts that smaller transactions will drive deal flow in India this year, with most being in the range of $500 million to $2 billion. Healthcare, energy & infrastructure, specialty manufacturing, and technology are expected to be the most active sectors. He identified corporate clarity, financial sponsors, and the switch from the public to the private track as the three key drivers for M&A in India this year.
In recent years, India’s government has implemented reforms to improve the ease of doing business in the country, attracting foreign investors. However, the Covid-19 pandemic has affected India’s economic growth, leading to a contraction of 7.7% in 2020. Despite this setback, India is still projected to be one of the fastest-growing economies in the world in the coming years, with a predicted growth rate of 9.5% in 2021 and 8.5% in 2022, according to the International Monetary Fund.
The Indian government has also announced plans to privatize state-owned companies and invest in infrastructure, which could attract further foreign investment. In addition, the country’s large consumer market and young population make it an attractive destination for businesses looking to expand.
However, India’s regulatory environment and bureaucratic red tape can pose challenges for foreign companies looking to do business in the country. The government has recently announced further reforms aimed at addressing these issues, including changes to labor laws and simplification of the tax system.
Overall, while India’s mergers and acquisitions (M&A) activity may not reach the same levels as in 2022, it is still expected to remain strong in 2023, with a focus on smaller transactions and key sectors. The country’s growing economy, government reforms, and potential for further investment make it an attractive destination for global financial firms.