Mumbai/Hong Kong: 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.
We are deeply grateful to our readers & viewers for their time, trust and subscriptions.
Quality journalism is expensive and needs readers to pay for it. Your support will define our work and ThePrint’s future.
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.”
Recent political tensions between India and China have cast a heavy pall over dealmaking prospects between the neighboring countries. Even before their worst military clashes in 45 years, the Indian government drew China’s ire with its move in April to tighten foreign investment rules on countries it shares a border with.
Chinese companies pledged to invest about $579 million in Indian companies in the first six months of this year, down from $1.5 billion for the same period in 2019, according to data compiled by Bloomberg.
Even as both countries have agreed to deescalate tensions on their disputed border, bankers are expecting further slowdown of Chinese investments for the rest of the year. Yet some are taking the long view.
“There could be delays in new investments or existing investments being topped up this fiscal year,” Balasubramaniam said, adding that the onset of winter will help limit further clashes over territory. “Chinese investments will likely pick up momentum late next year given the current border standoff.”
In the meantime, global investors including private equity firms are driving transactions with India.
KKR & Co. said last week it will acquire a controlling stake in J.B. Chemicals and Pharmaceuticals Ltd., while Carlyle Group plans to purchase a 20% stake in Indian billionaire Ajay Piramal’s pharmaceutical business.
The country’s antitrust regulator recently approved Facebook’s $5.7 billion investment in Jio, paving the way for a slew of smaller investments in the digital services business.
“We are already witnessing an increased momentum in deal activity and it is likely to accelerate over the next six months,” Rothschild’s Shah said.-Bloomberg
News media is in a crisis & only you can fix it
You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.
You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.
We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.
At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.
This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.
If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.