Lack of confidence in Indian policies, especially the tax regime, is taking its toll on the merger and acquisition (M&A) deals involving Indian companies.
Inbound M&As, or overseas firms buying Indian companies, slipped 2.3% to $10.8 billion from the first nine months of 2012. The bulk of money flow were in consumer staples at $3.7 billion, a nine-fold increase from the first nine months of 2012, according to the data compiled by Thomson Reuters.
The value of announced M&A deals rose 6.8% to $23.8 billion in the first nine months over the year-ago period, which was the lowest nine-month period since 2009 ($14.9 billion).
M&A activity was down 29.5% at $5.4 billion in the June-September quarter 2013 against the same period last year. Sequentially, from the second quarter of 2013, the decline was much higher at 60.1%
The average M&A deal size for transactions with disclosed values involving India climbed up to $72.8 million so far this year, as more deals were announced above $1 billion in value, compared with $68.8 million during the first nine months of 2012.
Domestic M&A at $3.6 billion was down 65.4% compared with the same period last year, the lowest January-September level since 2004 ($1.5 billion).
The materials sector comprised 41.2% of India’s domestic M&A sector, down 29.4% over the same period last year.
Total cross-board M&A grew 36.7% to $19.3 billion in January-September 2013, driven by the 178.5% increase in acquisitions by Indian companies overseas.
The energy sector accounted for majority of the acquisitions involving Indian companies with 25.5% market share worth $6.1 billion, a 246.7% increase over the same period last year. Industrials (18%) and consumer staples (16.1%) too witnessed a significant 203.8% and 221.3% rise, respectively, year on year.
Completed M&A deals involving Indian companies totaled $21.8 billion, a 58.1% growth from the first nine months of last year.