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Digital insurgents are taking advantage of the changed circumstances post-pandemic to transform India’s corporate landscape. This has been helped by the country’s rapidly developing digital infrastructure and various regulatory frameworks. We discuss how traditional Indian conglomerates are responding to the emergence of digital disruptions, mergers and acquisitions (M&As) as a form of corporate strategy. We look at scope, talent deals and portfolio upgrades as large companies actively invest in new digital growth engines. Finally, we have outlined the latest trends in the Indian deal ecosystem, which has expanded manifold in recent years.
The traditional business landscape, as we know it, is evolving at breakneck speed, enabled by innovation and digital transformation. Frontier technologies are driving the fourth industrial revolution, particularly driven by emerging technologies such as artificial intelligence (AI), blockchain and 5G.
Driven by global cooperation and competition, leading economies including India, the US, China and the European Union have all sought to invest heavily in these frontier technologies. Technology-based partnerships seem to be gaining prominence in international politics as well. The recent Indo-Pacific Economic Framework (IPEF) Ministerial Conference is a testimony to the growing importance of technology cooperation initiatives to aid economic growth.
These technological innovations have been further shaped by the Covid-19 pandemic, changing consumer behavior, business practices and shaping global economies. As a result, traditional businesses have had to modify their organizational strategies, marketing systems and operating models.
Additionally, as the global economy continues to rapidly change due to financial instability, geopolitical uncertainty and consumer preferences, global C-suite executives know that business agility and adaptability are essential for companies to remain relevant. As a result, multinational corporations and small enterprises in all sectors are embracing technology, expanding non-core businesses, and acquiring, merging, and capitalizing on new markets. All this has led to a massive consensus movement both internationally and in India.
How has technology changed the face of business?
Digitization is a multi-faceted process with various manifestations in the value chain, such as supply chain automation, digital tokenized currencies, mechanized distribution platforms, etc.
Such digitization, an ongoing process and geopolitically uneven, has led not only to digital trade in goods and services but also to cross-border data flows. Consequently, global policy makers recognize the need to manage tax implications as well as ensure fair distribution of risk and control of this new profile of global trade associated with such information exchange.
Some successful examples of digital disruption include the platform economy such as Uber, Amazon, Facebook or Airbnb, augmented/virtual reality (AR/VR), automated human resources (HR) processes, 3D printing, etc.
Enabling technology to put India on the global unicorn map
In India too, technological trends like automation, AI, machine learning (ML), Internet of Things (IoT), data analytics are disrupting traditional business models. According to a recent report titled “Indian Tech Trends”, the total valuation of India’s tech unicorns (enterprises valued at US$1 billion) is estimated to reach US$535 billion by 2022. .
While the story of India’s digitization began before 2020, the disruption caused by the pandemic has increased the role that technology plays. This has been well exploited by startups and digital insurgents in sectors like finance, retail, technology, manufacturing, logistics, etc. In fact, India is one of the top three countries to register new unicorns after the US and China. E-commerce and fintech unicorns are at the forefront.
India’s unicorn landscape, as of August 2022 |
||
Sector |
Number of unicorns |
The name of the unicorn |
E-commerce |
23 |
Cars24, Dealshare, Meesho, Mensa, MogliX, Nykaa, Droom, Firstcry, Shopclues, Paytm Mall, Udaan, Infra Market, Mamaearth, Spinny, Snapdeal, Lenskart, Livspace, Licious, Globalbees, CommerceIQ, Flipkart, The Good Glamm (earlier MyGlamm) ), of Business |
fintech |
22 |
Aco, BharatPay, Bill Desk, ChargeB, Paytm, MobiWick, OxyZo, PhonePay, Pine Labs, Coin DCX, Coinswitch Kuber, CRED, Slice, Razorpay, Cred Avenue, DIGIT, Groww, Policy Bazaar, Zerodha, Zeta, Open, OneCard. |
Enterprise Tech |
19 |
Amagi,apna, Browser Stack, Freshworks, Postman, Zetwerk, Gupshup, Darwinbox, Zenoti, Zoho, Hasura, Mind Tickle, MApmyindia, Fractal, Mu Sigma, Uniphore, Inmobi, Druva, Icertis |
Consumer services |
9 |
BigBasket, Cardeho, Grofers, Info Edge, Kikr, Rebel Foods, Swiggy, Zomato, City Company |
Media and entertainment |
7 |
Dailyhunt , View , Games 24 Seven , Mobile Premier League (MPL) , Walkthrough , Dream Sports , Chat Share |
Edtech |
6 |
Byju’s, Eruditus, Unacademy, Lead, Upgrad, Vedantu |
Logistics |
5 |
Delivery, Express Bees, Elastikrun, Blackbuck, Revigo |
Healthcare |
4 |
Pharmacy, Healing Fitness, Innovator, Pristine Care |
Travel Tech |
3 |
Oh, make my journey easier, make my journey easier |
Transport Tech |
2 |
Ola, Ola Electric |
Cleantech |
1 |
Restore power |
Real Estate Tech |
1 |
Broker |
It is interesting to note that this rapid growth of industry disruptors or insurgents across geographies and sectors such as fintech, edtech, e-commerce, etc. will set India’s M&A activity at an all-time high by 2021 and maintain strong consensus. In the year Activity in the first half of 2022 (H1). These unicorns are aggressively trying to increase their capacity to deliver a holistic channel experience to consumers. For example, edtech arm BYJU’s made over 11 acquisitions worth over $2 billion, of which nearly $1 billion went into Aakash Educational Services, an offline test preparation company, to build an omnichannel learning offering for its test preparation vertical. Oyo, the Indian hospitality chain has also ventured into many new geographies to expand its scale of operations.
M&A in India: Trends and Outlook
Although the pandemic has fueled geopolitics with economic headwinds and looming unrest, the consensus movement in India in 2016 A record high of $598 was achieved in 2021 at a price of $112.07. The pandemic crisis and resulting gaps in traditional business capabilities have been exploited by startups and digital insurgents in sectors such as finance, retail, technology, manufacturing, logistics, etc. Inclined towards consumer goods, marketplace platforms, fintech and edtech companies.
A total of 561 agreements have been reached by September 2022. Venture Intelligence. Large strategic investments or takeovers continued to dominate the deal space in 2022, where 14 deals (as of September 17, 2022) were reported to be of high value (worth more than US$1 billion). Major sectors attracting these mega deals include Information Technology (IT), Pharmaceuticals, Mobile Services, Media & Entertainment, Renewables, Infrastructure, Education, Banking etc. In 2021, high-priced transactions peaked at 23 deals.
In the year The highest reported transaction in terms of deal size in the first six months of 2022 took place in the IT sector, with Mindtree Consulting being acquired by L&T Infotech for US$ 7.72 billion. In the year Other notable deals in the digital space in 2022 include:
- Acquisition of e-commerce platform Blinkit by Zomato in June 2022 for US$578 million
- Acquisition of online eyewear platform Owndays by Lenskart for US$400 million in June 2022
- June 2022 acquisition of logistics services provider Picrr by Shiprocket for US$200 million
- Acquisition of hyper-automation services provider Vuram by WNS for US$165 million in July 2022
- May 2022 Acquisition of Clovia by Defense Retail Ventures for $125 Million
Acquisitions in technology and healthcare in H1 2022, availability of private equity and abundant liquidity coupled with historically low interest rates fueled M&A growth in India.
Which are the major sectors attracting the highest number of M&A deals in India?
As of 2015, the IT and ITS sector dominated M&A deals, followed by manufacturing, healthcare, and banking and financial services. In terms of deal value, the technology, entertainment, energy and financial services sectors led the way.
Looking at the trends for the first quarter (Q1) of 2022, enterprise tech has emerged as the hottest sector for M&A activity, recording 26 deals among Indian startups. Many of these enterprise tech acquisitions are either to grow the acquired company’s house of brands or to enable these startups to gain access to emerging technologies. For example, PhonePe’s acquisition of GigIndia for enterprise payments and its acquisition of cloud-based telephony startup Gupship, Nolarity was bought due to interest in the startup’s technology.
E-commerce was also the single largest segment in terms of M&A in 2021. Direct-to-consumer (D2C) is the fastest-growing segment of ecommerce, with a total market opportunity of $302 billion in 2030, a growth of 23.8 percent. .
In financial services, non-banking financial companies (NBFCs) showed resilience in 2021 despite the Covid-19 pandemic and this momentum is expected to continue in 2022. In the healthcare and education sectors, deal activity has seen a steady increase, fueled by large deals such as Baiju’s $1.4 billion fundraising round from multiple investors and Zydus Animal Health’s $398 million private equity-led consortium.
How are businesses coping with digital disruption?
Businesses that lead to scope and capacity agreements
Recent trends indicate that companies are focused on the size of the deal rather than the valuation, and their aim is not only to grow their businesses, but also to transform them. This explains the changing trend of increasing number of price concessions in India to around 40 percent. In the year By 2021, scope and capability deals will account for 46 percent of strategic deals worth more than US$75 million.
Most conglomerates are investing in technology-enabled growth engines in the future, hoping to prevent the disruption of a core business. They also facilitate the process of shifting trade boundaries into newly accessible nearby markets. For example, India’s leading health-tech player PharmEasy has made several acquisitions, including a 66 percent stake in Thyrocare, tapping into Thyrocare’s extensive network of collection centers.
Portfolio improvement by conglomerates to invest in new growth engines
Indian corporates are expanding their portfolios through M&A, diversifying into future profit pools in areas such as digital insurgents, electric vehicles, etc. and are shedding ownership of legacy assets. For example, the Tata Group has been actively shaping its portfolio and completed 21 deals in the past two years, including several acquisitions to build its superapp and strengthen its position in consumer goods.
about us
The India brief was prepared by Dezan Shira and Associates. The firm assists foreign investors across Asia from offices around the world, including Delhi and Mumbai. Readers can write to them. india@dezshira.com for more support in doing business in India.
We also have offices or partnership partners in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, assisting foreign investors. GermanyAnd the United States, in addition to exercises Bangladesh And Russia.
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