Konsult Whitepaper Analysis

Deals in India: Annual Review and Outlook for 2021

Pandemic brought bigger Opportunity than Threat:

Pre-COVID period: Most companies across different sector were already facing
significant challenges of which major sector includes manufacturing, financial
services and real estate. These sectors were already trying to cope with mounting
bad debts and growing concern over its repayments.

Initial- COVID period: The financial condition of the company in pre-COVID period
became more aggravated by the pandemic. The lockdown in India severely
impacted almost every sector. Most sectors were majorly affected because of
disruption in labour, capital inadequacy and demand contraction. During the initial phases NPAs (Non-performing assets) had spiked again.

Mid- COVID period: Downfall in quality asset was also witnessed which also created a lucrative opportunity. Special situation funds or distressed funds have already enhanced their operations in India. A clear interest of recovery derived funds and strategic players, to pursue these distressed situations. . There has been an infusion of approximately USD 1.5 billion into distressed assets from PE funds this year. This was significantly greater than last year showing the potential in the market.

Quality Deals Leading To Quick Recovery

The largest domestic deal of 2020 by Reliance Retail Ventures which acquired the retail, wholesale, logistics and warehousing businesses of Future Group for USD 3.3 billion.
•Mergers were also recorded in the banking sector which helped them to revive from their previous distress situation.

The merger of public-sector banks did account for improving capital efficiency and financial inclusiveness.
•Sever M&A deal were drives and dad itself were 50 percent of the deal value. The current volatility, uncertainty and complexity also indicate that this trend can continue in coming times.

Challenges Within Investor Community 2020:
• Foreign direct investment (FDI) worth USD 30 billion in India between April– September 2020 which was 15% increase over the same period last year.
• Facebook invested around USD 5.7 billion in JIO Platforms for nearly a 10% stake – possibly one of the largest deals to be completed virtually during the lockdown.
• Google also invested USD 4.5 billion taking 7.7% stake in JIO Platforms
• FDI will continue to play a crucial role in the economic development of India. These FDI not only bring capital but also improved governance, operational capabilities and international expertise.

FDI : crucial role in 2020 and way ahead
Uncertainty in 2019:
2019 did witness the uncertainty not only in tax administration but also in increased frictional costs on capital mobility including dividend distribution tax, buy back tax and so on diminishes returns prospects. This year also did witnessed a slowdown in growth and the effect can be seen as GDP growth down to 4.5% which was 26 quarter low.
The next big Challenge of COVID-19:
As we all would be well aware how economic harm to businesses and investors were mounting daily during the initial and peak levels of COVID-19 and how difficult it had been for investors and industries to witness this damage. The agility and adaptability were vital factor for all organisations and remain relevant. We have seen how dependency in technology have accelerated over a last year and how liquid became pain point.

Optimism on the PE Front

Investments worth USD 38.2 billion were recorded in 2020, amounting to nearly the same level of activity in 2019
• Reliance group was the major contributor to PE deal values
• Growth-stage PE investments were at an all-time high of USD 15 billion, 66% of which were accounted to investment in Jio Platforms
• Buyouts witnessed a sharp decline due to risk-averse approach adopted by several funds.

Shift in investor priorities

Sectors like technology, energy, financial services and real estate were the top sectors attracting PE investors. However, investor priorities have shifted in 2020.
• Telecom replaced technology in the top position by attracting investments worth USD 11.2 billion. Another new entrant was retail sector attracting investment worth USD 6.5 billion.
• Increased level of investment in telecom and retail sectors was on account of large-scale investments in Reliance Group entities.

India outlook 2021

2020 allowed Business to quickly repair, rethink, and reconfigure their corporate strategies to ensure financial stability and operationality.
• COVID-19 also highlighted the importance of building sustainable and resilient organizations backed by good governance, digital capabilities and robust business models, and we could expect these aspects to drive collaboration and partnership in the future.
• Survey carried out by PwC to assess the CXO community’s views on the current crisis and the way forward. The results echoed confidence in India’s recovery, with 82% of the respondents expecting to return to pre-Covid revenue run rates by June 2021.
• With corporate India focused on recapturing demand and building organizational resilience, supportive Government reforms and policies will create a more conducive business environment for the investor community, thereby contributing significantly towards India becoming #FitForFuture.

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