Q3 Deals: Indian Startups Shine, E-commerce Thrives but YoY Deals Drop

The Indian startup ecosystem took center stage leading the surge in deal volumes for the third quarter of 2023. This was highlighted in a comprehensive report published by Grant Thornton named Q3 Dealtracker: Providing M&A and PE Deal Insights. This quarter, spanning July to September, witnessed a thriving landscape in mergers and acquisitions (M&A) and private equity (PE) deals. Indian startups played a pivotal role, contributing significantly to deal volumes.

Shanthi Vijetha, Partner, Growth at Grant Thornton Bharat, expressed her confidence in India's economic growth. She stated, "With growth-oriented policies, reduced inflation, and increased infrastructure spending, India's domestic growth is set to fuel deal activities, particularly in traditional sectors (pharmaceuticals and healthcare) and the ever-accelerating digital transformation landscape (e-commerce and IT & ITES)."

Startups Steer the Ship

The standout data from the report indicates that Indian startups dominated the scene, accounting for the majority of deal volumes. During this quarter, a total of 135 deals were closed in the startup sector, amounting to an impressive USD 907 million in value. This statistic underscores the resilience and growth of the Indian startup ecosystem, which has proven to be a driving force in the nation's economy.

E-commerce Reigns in Value

While startups took the lead in deal volumes, e-commerce sector stole the spotlight in terms of value. Grant Thornton's report reveals that 33 e-commerce deals were executed in Q3 2023, accumulating a total value of USD 2,562 million. This makes e-commerce the sector with the highest overall deal value during this quarter. The report highlights the continued expansion and significance of e-commerce in India's business landscape.

A Year-to-Date Comparison: Drop in Startup Deal Activity

However, YoY comparison between 2023 and the same period in 2022 showed a significant decrease in deal activity in the Indian startup sector year-to-date, indicating a 39 percent reduction in the number of deals. This drop-in activity was even more pronounced in the M&A landscape, where values plummeted by a staggering 83 percent compared to the same period in 2022. The report attributes this steep decline to the absence of the massive billion-dollar deals that marked the previous year.

Private Equity Sector in Focus

In the private equity (PE) sector, there was a 40 percent reduction in the number of deals and a 28 percent decrease in their values compared to the year-to-date data for 2022. This reduction signifies a slightly more stable landscape in PE deals compared to M&A, although it still shows a significant decrease in overall activity.

Q3 2023: India's Deal Landscape Was Vibrant & Diverse

The third quarter of 2023 was a period of remarkable activity in the Indian deal landscape. A total of 302 deals were executed, with a combined value of USD 13.4 billion. The report highlights that startups, along with e-commerce and IT & ITeS sectors, were at the forefront, contributing to an impressive 64 percent of total deals during the quarter.

The report says that in Q3 2023, India's deal landscape was vibrant and diverse. The e-commerce sector was pivotal, marked by major investments, such as Walmart’s USD 1.4 billion in Flipkart and Titan’s USD 564 million in Caratlane. Reliance Retail was a major contributor to values, showcasing promising growth. Notable unicorns emerged, such as Zepto, which raised USD 200 million. Overall, Q3 2023 demonstrated a dynamic and varied deal environment in India.

Positive Economic Outlook

The report concludes on an optimistic note regarding India's economic prospects for the year 2023-24. Growth-oriented policies, subdued inflation, and increased infrastructure investments are expected to fuel deal activities. Traditional sectors such as pharmaceuticals and healthcare, along with the ever-accelerating digital transformation landscape represented by e-commerce and IT & ITES, are set to play significant roles in this economic resurgence.

Anirudh Gupta, Partner, Grand Thorton Bharat LLP, said, "The sector has seen consistent growth and investments in online retail and digital marketplaces reflecting the resilience of the domestic economy and the eimportance of the sector. Online marketplaces have made it easier for the small and medium sized businesses to reach a large customer base without the need for extensive physical storefronts. Expansion beuond major cities, growth of B2B E-commerce, emergence of new retail formats such as quick commerce and omnichannel retail are the new themes."

The report from Grant Thornton paints a picture of a dynamic and evolving business landscape in India, where startups continue to drive deal volumes, and e-commerce shines in deal values. While there have been year-to-date declines in some sectors, the overall economic outlook remains promising, with the potential for further growth and expansion in the coming months.

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