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The year 2023 saw 85 public takeovers implemented through the tender offer route under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). The number of takeovers were only slightly below the number of takeovers in CY22 (93 in all). The aggregate transaction size (i.e. the aggregate size of the negotiated deal and tender offer) of takeovers announced in CY23 was ₹274.27 billion, 77% lower than that of the takeovers announced in CY22, which was ₹1,180 billion. Primarily, the deal activity in CY23 was driven by domestic acquirers. Foreigners executed only three deals in this space (including only one deal by a PE player), which was substantially lower than CY22 (being 11 ).

The Indian economy remained robust and resilient this year. The stock market remained rather high and the indices recorded all-time highs, which gave exit and profit booking opportunities to a lot of investors. PE investors exited their long-term Indian investments through a series of block/ bulk deals and we have covered the same in our report published on December 19, 2023[1].

There was a slowdown in the overall M&A activity in India, both private and public. This was primarily due to valuation concerns as there is a significant mismatch between buyer-seller expectations, in addition to both foreign strategic and PE players being on a ‘wait and watch’ mode. Some PE and strategic players are not so concerned with geo-political factors and global economic uncertainty. Accordingly, the first few days of CY24 saw Brookfield announcing the acquisition of ATC’s assets for USD 2 billion (approx.).

In this blog, we have focused on the key highlights of CY23. We will also be releasing a detailed report shortly, analysing CY23 deal activities and comparing it to the deal activities of CY21 and CY22. The report will have greater details of public takeover activity of CY23 than the ones covered in this blog post.

Analysis of sector-wise activity

In value terms, the telecom sector saw the largest takeover at an offer value of ₹2,675 crore, followed by the healthcare sector aggregating ₹2,286 crore and the NBFC sector aggregating ₹2,174 crore. In number terms, the NBFC sector saw the highest number of takeovers (at 16), followed by, (i) the manufacturing sector (11); (ii) textiles and clothing sector (10); and (iii) healthcare sector (8).

In CY23, the five biggest takeovers by transaction size were (in descending order of value): (i) Proximus Group’s proposed acquisition of Route Mobile Limited (aggregating ₹8,598 crore, approx.); (ii) Nirma’s proposed acquisition of Glenmark Life Sciences Limited (aggregating ₹6,995 crore, approx.); (iii) Burman Group’s proposed acquisition of Religare Enterprises Limited (aggregating ₹2,523 crore, approx.); Adani Group’s proposed acquisition of Sanghi Industries Limited (aggregating ₹2,493 crore, approx.); and Aditya Birla Group’s acquisition of TCNS Clothing Co. Limited (aggregating ₹1,941 crore, approx.). These five largest deals comprise 82% of the aggregate transaction value of all deals in CY23.

The following graph shows in number and value terms the offers in major sectors in CY23:

Public Takeovers in India: Flashback 2023

CY23 versus CY22

Public Takeovers in India: Flashback 2023

Other significant highlights of CY23

  1. Size of tender offers: The largest tender offer by value was for Route Mobile Limited at ₹2,675 crore (approx.) and the smallest was for GD Trading and Agencies Limited at ₹3.06 lakh. Other large tender offers were for Religare Enterprises Limited (₹2,116 crore, approx.), Glenmark Life Sciences Limited (₹1,343 crore, approx.), TCNS Clothing Co. Limited (₹941 crore, approx.) and Sanghi Industries Limited (₹819 crore, approx.).
  2. Pricing analysis: Takeover Regulations do not cast any mandatory requirement on which the deal price should be fixed. However, they do mandate the minimum price that the acquirer has to offer to public shareholders. In CY23: (i) in 71 takeovers, the price offered to public shareholders was higher than the 60 day VWAP (for frequently traded shares) or the fair value (for infrequently traded shares) (Minimum Price); (ii) in 14 takeovers, the price offered to public shareholders was the same as the Minimum Price; (iii) in 48 takeovers, the negotiated deal price was higher than the Minimum Price; (iv) in 6 takeovers, the negotiated deal price was equal to the Minimum Price; and (v) in 27 takeovers, the negotiated deal price was lower than the Minimum Price.
  3. Deal activity during the year: The first half of CY23 saw many smaller deals being announced. The second half of CY23 saw an uptick in ‘large-deal’ activity. Number of tender offers announced during the second half of CY23 (37 in total) was lower than first half of CY23 (48 in total).
  4. Foreign vs. Indian acquirers: Non-residents announced three public takeovers in CY23. The aggregate value of such tender offers was ₹3,485 crore, which constitutes 33.24% of the aggregate value of all tender offers in CY23. The aggregate value of tender offers made by non-residents in 2023 was lower than in 2022 (by 91%).
  5. Time taken by SEBI to clear DLOF: In CY23, SEBI took an average of 71 days to issue observations on the DLOFs, with the longest being 137 days and the shortest being 35 days. The average time taken by SEBI to clear the tender offers in CY23 was higher than the time taken in CY22.
  6. Offer by financial investor: CY23 saw only one takeover announced by a PE/ financial investor, i.e. the takeover of Camlin Fine Sciences Limited (operating in the Chemicals sector) by Infinity Holdings.
  7. Cancellation of Letter of Offer: In the takeover of Rita Finance and Leasing Limited, the final letter of offer was cancelled as it was issued prior to the receipt of RBI approval. The cancellation was pursuant to concerns raised by public shareholders on the certainty of deal closure sans the main regulatory approval required for the deal.
  8. Conditional Tender Offer: Aditya Birla Group launched a conditional tender offer for the acquisition of TCNS Clothing Co. Limited. This is the only example of a successfully completed conditional tender offer in the last three years.
  9. Minority Investment in AcquirerIn the Proximus Group-Route Mobile deal, post the underlying deal closure, the sellers will acquire a minority stake in the acquirer entity itself. Such swap of shares by sellers from the target ListCo level to the acquirer is unusual.

Year 2024

M&A activity in CY24 would be primarily focused around sectors such as energy transition, healthcare (including pharmaceuticals), infrastructure, fintech and IT (largely AI driven). Though CY23 did not see a high stress asset M&A transaction, we believe that stressed assets deals will be on the rise in the near future.

The most loved discussion topic of CY23 was artificial intelligence (AI)/ GenAI. It is already well known that AI has been thoroughly disruptive in the tech sector world over. As people develop new skill sets and existing tech players adapt themselves to such disruptive changes, CY24 will see new entrants exclusively in the AI space. Funding in this sector in India, as of now, would be ‘value proposition’ and ‘key impact’ driven. We do not see quick fire unicorn status being achieved by startups, at least as of now. The primary reason for the same being that a lot of startups which attained quick fire unicorn status saw erosion in value in late-stage funding rounds.

On the ESG front, we are expecting large strategic players in India to allocate more towards ESG commitments and then acknowledging that ESG is more than just an on-paper ‘good to have’ commitment.

Lastly, we believe that the second half of CY24 will see higher deal activity for the obvious reasons. By then, the general elections would be over and all uncertainty related concerns would be put to rest. We are expecting the average deal size in CY24 to be far bigger than CY23.

* The Authors were assisted by Arnav Shah, Principal Associate, Aseem Sahni, Senior Associate, Shailendra Shukla, Associate and Swathi Kathi, Associate