HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 41
INDIA GROUND-BREAKING YEAR FOR IPOS AND A BUOYANT YEAR PREDICTED FOR M&A IN 2022
India’s mid-market segment witnessed 68 deals in Q4 2021, almost half the number of deals that took place in Q3 2021 (123 deals). Deal value also fell significantly to USD 7739m in Q4 2021 compared to USD 12776m in the previous quarter, a drop of 40%. Furthermore, PE transactions accounted for 49% of total deal volume and 56% of total deal value. However, we believe this was a temporary blip and expect 2022 to be a buoyant year for M&A. ECONOMIC BACKDROP India’s GDP growth during a COVID-hit 2020 contracted drastically as a nationwide lockdown brought economic activity to a standstill. During the lockdown, the Indian stock markets took a heavy beating primarily due to uncertainty around the spread of the virus. Naturally, equity fund raising, especially through Initial Public Offering (IPO), was very tepid in this period. What was more surprising than the drastic fall was the way the market rebounded during the last few months of 2020 and then into 2021. The government pumped
money (via various monetary & fiscal measures) into the economy to tide over the impact of pandemic and some of the money found its way into financial markets, providing high levels of liquidity. Furthermore, global liquidity provided additional funding that was also invested in markets. Also, as with any market, when it rises, a lot of retail money is invested, further propelling the indices to a life-time high. The bull trend in the market with liquidity all around has resulted in slew of equity raises. The high market indices provided an opportunity to raise funds through IPO at attractive valuations. The Reserve Bank of India, in its Indian Economy Report, mentioned that 2021 could be India’s year of IPOs and that prediction has come true. In 2021, more than USD 17.33bn has been raised through some 65 IPOs, the highest amount raised via IPO proceeds in two decades. In terms of numbers , approximately, 17 IPOs were launched in Q1 2021, seven in Q2 2021, 19 in Q3 2021 and 21 in Q4 2021. It is interesting to note that the success of IPOs helped PE/VC firms make attractive returns on their investments. Most of the IPOs were in the form of Offer for Sale, wherein the PE/VC firms and the promoters
BIG PICTURE
• Deal numbers fall by nearly half from the previous quarter and value was down by 40% • TMT continues to lead the way in sector activity • IPOs hit a record high in 2021, raising USD 17.33bn from 65 IPOs.
PE/TRADE VOLUME &VALUE
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Trade Volume
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1 Mainboard IPO in India 2 Business-standard.com – Fund raising via IPOs in 2021
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