- Maulik Doshi
2018 was a phenomenal year for the deal landscape in India, with the total value of transactions crossing the USD 100 billion mark and setting an ambitious target for 2019 to surpass. While mergers and acquisitions had alone collated USD 80 billion, equity investments stood at a tepid USD 25 billion in the previous year. Despite contrary external factors and central government elections in the country during the first half of 2019, equity investments performed exceptionally well this year at USD 38 billion, exhibiting a 52% increase from 2018. With a large number of corporations having their IT, finance, and compliance departments based out of India, the country is positioned as the delivery center for the world. This explains why the deal activity was mainly focused on finance and information technology, reflecting in the 60% share that these two sectors held in the overall equity investment pie.
Recent developments in technology-driven areas such as fin-tech, data analytics, electric vehicles (EV's) are garnering further investments in these segments. Increasing internet penetration, access to smartphones, higher disposable income, and adoption of practices such as the use of payment gateways have encouraged subsequent funding rounds by private equity and venture capital investors in e-commerce companies. For instance, major foreign investors such as Softbank and Alibaba Group have invested around USD 1 billion in PayTM, with plans to further infuse funds to leverage the escalating market needs and opportunities emerging from the current credit crunch.
2019 witnessed one of the biggest private equity deals of the decade, with Brookfield Asset Management (a Canadian investment firm with one of the largest infrastructure portfolios in the world) investing USD 3.6 billion in Tower Infrastructure Trust (an investment infrastructure trust sponsored by Reliance Industries Limited). Regulatory reforms such as RERA (Real Estate (Regulation and Development) Act, 2016), GST (Goods and Services Tax), along with Insolvency and Bankruptcy Code are making the Indian economy an easier place to do business, which is helping build investor confidence and attract investments in the infrastructure and real estate sectors.
India now holds the third-largest startup ecosystem in the world, claiming 30% of the equity investments in 2019. Y-Combinator, an American start-up seed accelerator that helped with the launch of companies such as Airbnb, Dropbox, etc., has selected 28 Indian start-ups for its recent batch. In this initiative, startup founders will get to interact with industry experts, investors, and other founders for insights to build their business.
Further, India's enormous captive consumer market, laser focus on growth and development, along with prevalent consolidating and restructuring activities, continue to instill confidence in investors looking to park their investments in a country with significant growth potential. The government's initiatives in 2019 have been targeted towards long term reforms and revisions in the fiscal and monetary policy aim at enabling the country to weather the global economic scenario and maintain India's stability as an investment destination.
Maulik Doshi is Senior Executive Director – Transfer Pricing and Transaction Advisory Services. Views expressed are the author’s personal.