How India is becoming an unlikely Asian hotspot for mergers & acquisitions
July, 20th 2020
Thanks largely to $15 billion of investments in Jio, India accounts for more than 12% of announced deals in the Asia Pacific region so far this year.
Mukesh Ambani’s ambitious courtship of international investors has helped turn India into a rare bright spot for dealmaking in 2020, a shift that bankers say is likely to continue as the battle for the country’s digital economy heats up.
Thanks in large part to $15 billion of investments in Ambani’s technology venture from the likes of Facebook Inc. and Silver Lake Partners, India accounts for more than 12% of announced deals in the Asia Pacific region so far this year, the highest ratio since at least 1998. The country’s tally has jumped 18% from a year ago to $55.3 billion, defying an 18% slide for the region, according to data compiled by Bloomberg.
With half a billion Internet users and growing, India is witnessing pitched battles in everything from e-commerce and content streaming to messaging and digital payments — similar to the early days of China’s digital boom. The sector’s importance has only increased this year as the Covid-19 pandemic pushed India to impose the world’s biggest lockdown in late March.
“India has become one of the busiest markets for M&A in Asia,” said Kerwin Clayton, co-head of M&A for Asia Pacific at JPMorgan Chase & Co. “Global companies and investment funds are pondering more options to enter India, in a similar way to what happened with China a decade or so ago.”
Billionaire Ambani’s Jio Platforms Ltd., which houses movie, music apps and India’s biggest wireless carrier, is front and center in the surge of activity. The latest to join Jio’s list of investors is an arm of computer chip giant Intel Corp., propelling its valuation to $65 billion.
“There was significant deal activity in the tech space already but nothing of the speed and quantum we witnessed in Jio Platforms,” said Aalok Shah, managing director at Rothschild & Co. “Jio Platforms is a unique opportunity which attracted significant investor interest.”
The health care and infrastructure sectors are also going to see a surge in investment, Shah said. Sectors such as industrials and travel that have borne the brunt of the Covid-19 pandemic will be hit with divestment, and distressed asset sales will take place, he said.
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The pandemic has also put pressure on the country’s long-suffering financial sector. Indian companies, including banks, are more likely to raise funds in the markets to boslter their buffers, according to Srinivas Balasubramaniam, a senior partner at KPMG India. ICICI Bank Ltd. said Wednesday that it plans to raise as much as 150 billion rupees ($2 billion), while Axis Bank Ltd. announced plans last week to raise as much as $2 billion.
“A consolidation of financial services will start once the capital raising is done and dusted,” Balasubramaniam said. “The current economic slowdown coupled with the pandemic is likely to see the central bank force the hand of banks that have large subsidiaries and regulate them to dilute their stakes.”