In line with the global funding winter, deal-making involving domestic firms hit a three-year low after falling 51 per cent to USD 83.8 billion in 2023, saved by the mega-merger of HDFC twins -- the biggest deal in India Inc's history till date, according to an industry report.

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Excluding the USD 60.4-billion HDFC Bank-HDFC merger, year-on-year deal value comparison would have been down by another 23 per cent, as per LSEG Deals Intelligence, formerly Refinitiv, one of the world's largest providers of financial markets data. The bleak global deal environment translated into fewer mega deals in 2023.

As a result, there was only one deal above USD 3 billion in the year -- the HDFC Bank-HDFC USD 60.4 billion deal -- compared to five deals in 2022, Elaine Tan, senior manager at LSEG Deals Intelligence said in a note on Thursday.

However, in terms of the volume of deals, it was a minimal 1.7 per cent decline on-year, indicating that a healthier level of mid-market transactions dominated the market.

Given the likely fall in interest rates on the back of a steep fall in inflation globally, leading to improved economic conditions in 2024, making capital less costly to access, 2024 could drive an uptick in M&A activity both in the country after elections and also across the globe, Tan said.

It can be noted that a global funding winter started in March 2022 after Russia invaded Ukraine in late February of that year as economic uncertainty rose. The negative approach was also due to higher interest rates due to record high inflations across the globe making companies more cautious about engaging in M&As. Accordingly, worldwide M&As fell 17 per cent to a 10-year low of USD 2.9 trillion.

The equity capital market rose 60 per cent to USD 31.2 billion in the year, making it the highest annual total since 2021. The total proceeds from follow-on offerings more than doubled to USD 24.4 billion, driven by record-high block trades and accounted for 64 per cent of the follow-on proceeds.

On the other hand, fresh equity issuance through IPOs saw the busiest annual period since 1996 as the number of IPOs grew 56 per cent from year-on-year, with at least 236 small-to-mid-sized listings raising USD 6.8 billion, which, however, was 11 per cent less than in 2022.

Target India M&As reached USD 76.4 billion, down 51.5 per cent year-on-year and the lowest annual period by value since 2020. Domestic M&As totalled USD 51.8 billion, down 56.4 per cent from 2022. Inbound M&As fell 36.4 per cent to USD 24.6 billion, the lowest annual period since 2015.

Outbound M&As reached USD 5.9 billion, down 40.4 per cent and the US was the most targeted nation with 22.6 per cent of the share. Private equity-backed M&As amounted to USD 13.4 billion, down 60.7 per cent, and the lowest annual total since 2020.

The majority of the deal-making activity targeted the financial sector, which totalled USD 31.4 billion, down 56 per cent in value. Financials accounted for 37.5 per cent of the total deal market share.

Industrials came second with USD 12.9 billion, down 8.7 per cent or 15.4 per cent of the market, followed by high technology with a 10.8 per cent market share at USD 9.1 billion.

Equity capital markets raised USD31.2 billion, up 59.6 per cent in the year, making it the highest annual total by proceeds since 2021. The number of ECM offerings also saw a 48.9 per cent increase.

Initial public offerings (IPOs) raised USD 6.8 billion, down 11.3 per cent in value, but in terms of issues, it was up 56.3 per cent. Follow-on offerings, accounting for 78 per cent of overall ECM proceeds, raised USD 24.4 billion, up 105.1 per cent, while the number of FPOs grew 39.8 per cent.

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