PE investments look up, but tax uncertainty persists

The pace of transactions has picked up in India, with deal volumes in the first quarter of calendar 2024 rising by a fourth sequentially and by a third in value. There were 455 deals worth $25.6 billion, of which over 75 per cent was due to mergers and acquisitions, according to PricewaterhouseCoopers.

The pace of transactions has picked up in India, with deal volumes in the first quarter of calendar 2024 rising by a fourth sequentially and by a third in value. There were 455 deals worth $25.6 billion, of which over 75 per cent was due to mergers and acquisitions, according to PricewaterhouseCoopers.

Private equity deal volumes also increased to 260 in Q1 of 2024 from 210 in Q4 of 2023, though deal value fell to $6.1 billion from $7 billion. Deal street was, however, awash with term sheets and deals in the pipeline that are expected to fructify later in the year.

M&A volumes also rose by nearly a fourth to 195, but were 60 per cent higher in value terms at $19.6 billions.

Besides traditional private equity funding, private credit, where global firms see opportunities, is also showing up in India, but remains nascent.

The only dark cloud is the uncertainty over taxes, which may hinder pricing, valuation and exits, senior officials at PwC said.

Deal trendsAfter falling for three quarters, dealmaking saw an uptrend in the March quarter, signalling a renewed interest in India by global firms as well as an optimistic macro environment. Private equity investments fell to their lowest level in six years in 2023, down 38 per cent on-year to $33 billion, according to data from PwC. The number of deals fell to 791 last year from 1,415 in 2022 and 1,531 in 2021.

However, the average size per deal increased 10 per cent to $46 million in the year.

In Q1 of 2024 there were 14 deals valued over $500 million, as compared to just nine in Q4 of 2023, including 12 M&A transactions.

The average ticket size for M&A deals was unchanged from the previous quarter at $142 million, and 42% higher on-year.

The average ticket size for PE investments fell 39 per cent to $27 million in the quarter under review, showing an increase in deals but mainly with smaller ticket sizes. As anticipated at the start of the year, most deals with disclosed values are in the lower- and mid-market segment, with around 80 per cent of total deals below $50 million.

Domestic deals grew by 44 per cent sequentially while cross-border deals fell 10 per cent. Domestic deals continue to dominate with 73 per cent share of total M&A deals.

Large deals this year include Viacom18 buying Star India for $4.5 billion, and Brookfield buying American Tower’s India assets for close to $2 billion

In Q1 2024, the media and entertainment sector led the market in terms of deal value, totalling $4.7 billion across 29 deals. The power sector followed with $3.1 billion across 29 deals. Pharmaceuticals, retail and consumer, and financial services saw high deal value among traditional sectors.

The retail and consumer sector saw 81 deals, with diverse transactions, but with lower value of $2 billion. The technology sector, with 49 deals, showed a modest value of $424 million, indicating frequent, smaller transactions, particularly in early-stage fundings within the start-up ecosystem.

In 2023, PE exits increased by a fourth from a year ago, with a 16 per cent rise in deal value. The year saw record exits through public market sales, climbing to 51 per cent in 2023, from 35 per cent in 2022. Big-ticket exits of over $20 million in the last two years were largely driven by public market sales and strategic sales.

Many portfolio companies funded by PE firms were preparing for IPOs and, over the next 18-24 months, several large IPOs are likely, said Bhavin Shah, Partner and private equity leader at PwC.

Private equity investments fell 75% in January-March 2023Private credit and tax uncertaintyMost private equity funds in India are also willing to provide debt solutions, said Shah, pointing out that not everybody may need equity.

Increasingly, global PE firms are exploring offering credit in India, as the returns are seen attractive. There are few credit funds in India currently, but this could change soon.

Tax uncertainty, however, dogs PE firms and investors. For instance, tax on capital gains by Mauritius-based funds remains contentious and litigated.

Shah said PE firms are not averse to paying taxes, but need to be told upfront to price it in their deals. The uncertainty is a stumbling block, especially when exiting investments in India.

Like (0)
Previous April 24, 2024 4:51 pm
Next April 24, 2024 4:51 pm

Related posts

  • Seasonal factors dissipate, U.S. initial jobless claims fall

    The number of Americans filing initial claims for unemployment benefits fell last week as seasonal factors that led to a surge in claims in New York the previous week disappeared.

    stock index May 16, 2024
  • Feng Xiyun: Analysis of foreign exchange, gold and crude oil trends

    April 25, [Gold technical analysis]: Judging from the gold daily chart, today’s trend is that gold has peaked in the mid-term and is bearish. Technically, the gold daily K-line has been negative for two consecutive times, with a decline of 90 points. The current hourly line and 4 The opening of the Bollinger Bands in the hourly chart diverges downward, and the SAR parabolic indicator releases a bearish signal. The green kinetic energy column of the MACD indicator in these two cycles has increased in volume. At the same time, the daily MACD indicator has also turned into a green column and gradually increased in volume. Today\’s trend is undoubtedly bearish. Today\’s European and American trading resistance focuses on the 4-hour MA5 moving average at 2315, followed by the 1-hour Bollinger Band mid-track position at 2320. Above, look at the suppression range formed by the hourly SAR extension point of 2328 and today\’s high of 2334. In terms of support, pay attention to the lower track of the hourly Bollinger Bands and the lower track of the 4-hour error band…

    stock index April 25, 2024
  • Goldman Sachs: The largest buyer has returned to the market and hundreds of billions of ammunition will help U.S. stocks survive May and June

    Goldman Sachs: The largest buyer has returned to the market. Hundreds of billions of ammunition will help U.S. stocks survive May and June. Source: Wall Street Insights Zhao Ying. Goldman Sachs reported that U.S. companies are expected to repurchase US$934 billion in stocks this year, an increase of 13% from last year, of which One-sixth, approximately 155.5 billion buybacks are expected to be executed in May and June

    stock index May 8, 2024
  • SBI MF targets to attract ₹5,000-crore investment in Automotive Opportunities NFO

    SBI Mutual Fund expects to mop up ₹5,000 crore through its seventh thematic new fund offer (NFO) on Automotive Opportunities, which will be open for investors till May 31.

    stock index May 16, 2024
  • A female technician from the eastern suburbs \”seduces\” her and adds extra time? Customer service response: The cooperative relationship cannot be forced.

    Special topic: Is \”big health care\” going to be launched too? 20,000 door-to-door massage technicians supported Dongjiao Daojia\’s IPO. Related reports: \”If you don\’t control it, it\’s a violation of the law!\” A man said that he was \”seduced and extra-charged\” by the technician when he made an appointment for massage. Dongjiao Daojia responded. According to media reports, there were consumer complaints [ Download the Black Cat Complaint Client] claimed that he made an appointment for a Chinese massage on the Dongjiao Daojia platform, and the female technician suddenly lay on top of him, touched his private parts extensively, and asked for an extra hour. In this regard, on April 25, Dongjiao Daojia customer service stated that the company has paid attention to this matter and has currently reported it to relevant departments to verify the authenticity of the video taken by the consumer. “After verification, no matter which party it is from, Those involved will be dealt with and held responsible for legal liability. Another customer service representative from Dongjiao Daojia said that the platform “does not allow any…

    stock index April 25, 2024
  • Indian financial markets to remain closed today on account of Bakri Id

    India's currency, debt and equity markets will be closed on Monday, June 17, for a holiday. Trading will resume on Tuesday, June 18.

    stock index 1 day ago