RIL deals account for over 1/4th M&A market in CY20

Mumbai: Stake sale by Reliance Jio and Reliance Retail contributes 61 per cent of the total Inbound Minority (foreign investor investing/acquiring a minority stake in Indian companies) M&A market with an investment of $27 billion, compared to the overall $43.9 billion received in CY20 through foreign investors in the Inbound Minority space, says a report by Kotak Investment Banking, which was released here today.

Reliance group also dominated the domestic-majority (Indian company acquiring a majority stake in other Indian company) deal market by acquiring retail and related business of Future group at an estimated value of $3.4 billion. The total Domestic-Majority M&A market recorded a total deal size close to $21 billion in CY20. Overall Reliance group accounted for over one-fourth of the total M&A deal market in CY20.

In fact, in CY20 both Inbound Minority & Domestic Majority transaction has driven the M&A activity in India, accounting for 60 per cent of the overall M&A activity in India.

Of the overall $109 billion of M&A activity, $65 billion came from Inbound Minority & Domestic Majority transactions. Apart from Reliance the other major Domestic-Majority deals with several large value transactions was the PSU bank mergers ($4.9 bn), Krishnapatnam Port-Adani Ports ($1.7 bn) and Embassy's Tech Village assets - Embassy REIT ($1.3 bn). S Ramesh, MD & CEO, Kotak Mahindra Capital Company, says. "The deal appetite has remained strong despite the pandemic. Easy and ample liquidity across the globe has been one of the key factors for driving deal making. We expect investors to continue to back winners in the post-Covid world and therefore outlook for IB will continue to remain strong. On back of a resilient equity market and vibrant M&A environment we expect the IB fee pool in the next 12 to 34 months to get closer to $1 billion."

Even without the RIL deals, deal value has fallen only by 11 per cent considering pandemic and still have a few weeks left in CY2020. The average deal size has increased to $76 million in CY20, compared to $ 68 million in CY19. Including RIL deals, the average deal size rises to $ 102 million. Meanwhile preservation of capital during pandemic has seen a decline in other types of deals – Inbound Majority, Domestic Minority and Outbound Transactions.

Meanwhile, increased activity was seen in sectors such as consumer and retail (Investment in Reliance Retail and Reliance's acquisition of retail and related businesses of Future Group), Real Estate (Acquisition of assets of Prestige Estates by Blackstone, Embassy REIT's acquisition of tech village assets), Digital (Investment in Reliance Jio, Inbound investments in Flipkart (by Walmart, Tencent and others), Oyo (by Softbank), Dream11 (by TPG)) and Healthcare/Pharma (IMCD's purchase of Signet, Inbound strategic investment in Sequent Scientific, Healthcare Global, JB Chemical).