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Local firms step up heat on M&A front

Mumbai: Domestic companies are increasingly snapping up local assets on the block, often beating private equity firms, a trend expected to continue on the back of strong balance sheets.

While much of the domestic consolidation was earlier led by large conglomerates such as Reliance, the Tatas or the Adani Group, in recent years, many mid-sized corporates have stepped up to widen their footprint and capabilities through acquisitions.

“Over the last year, we are seeing increasing participation in domestic consolidation from large- and mid-size Indian corporates across sectors and deal sizes. We expect this domestic consolidation trend to continue, as Indian corporates will continue to be acquirers of strategic assets to strengthen their product portfolios, distribution capabilities and technology platforms,” said Amit Thawani, managing director and head of investment banking, India at Nomura.

Thawani said cleaner balance sheets have helped Indian companies make these purchases. “With cleaner balance sheets, high liquidity, low leverage and access to capital, corporate India has turned into buyers of assets from being sellers of assets a few years back, a trend which will likely continue to remain relevant,” he added.

Some recent M&A deals where Indian companies have emerged as buyers include Torrent Pharmaceutical’s acquisition of Curatio Healthcare, Sheela Foam Ltd’s acquisition of Kurlon Enterprises Ltd, Godrej Consumer Products Ltd’s acquisition of Raymond Consumer Care Ltd, Dabur Ltd’s acquisition of Badshah Masala Pvt. Ltd, Nirma Ltd’s acquisition of Stericon Pharma Pvt. Ltd, and Hinduja’s proposed acquisition of Reliance Capital Ltd. Torrent is also vying for the Hamied family’s stake sale in Cipla, while Nirma is competing for Glenmark Life Sciences Ltd.

“Of particular interest is the emerging trend where, in numerous instances, domestic conglomerates are showcasing their formidable capabilities by outpacing well-established private equity firms in the competitive pursuit of coveted assets. This trend underscores the growing dominance of these larger corporates in the market,” said Manisha Girotra, chief executive of Moelis India.

However, this does not mean PE firms have taken the back seat; some of the recent large control transactions include Baring PE Asia EQT’s separate deals in fertility chain Indira IVF Hospital and education financing firm Credila Financial Services Pvt. Ltd, as well as Blackstone Group’s purchase of Care Hospitals from TPG Capital. PE firms have also been driving deal activity in IT services businesses such as Quest Global Solutions (where Carlyle acquired a 30% stake) and IBS Software Pvt. Ltd (where Apax Global acquired a 30% stake from Blackstone Group).

However, several transactions have seen domestic companies outbid large PE firms. In the case of Cipla, the Torrent-led consortium bid is said to be higher than that of the private equity firms in the fray.

Thawani said that sectors such as pharmaceuticals, healthcare services and renewable energy will continue to see robust M&A activity in the coming months.

Cement is also likely to see larger companies becoming more prominent through acquisitions, Girotra added.

Last month, Adani Group’s Ambuja Cement Ltd acquired Sanghi Cement Ltd for about 5,000 crore. The group is looking at other cement acquisitions to bolster its capacity, Mint reported. In another instance, Piramal Enterprises Ltd chairman Ajay Piramal also said in August that the group was looking at acquisitions in mutual funds and general insurance.

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Updated: 10 Sep 2023, 11:55 PM IST

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