Increased M&A Activity in Indian Pharma to continue in 2024

In 2023, the mergers and acquisitions (M&A) landscape in India has experienced a subdued growth trajectory, painting a somber end to the year.

According to Equirus estimates, the overall M&A deal size in the Healthcare and Pharma sector declined to Rs 170 Bn in the year-to-date (YTD) calendar year 2023, representing half of the Rs 355 Bn registered in 2022.

Despite this, there is a noteworthy upward trend in Private Equity (PE) deals within the healthcare and pharma space.

Bhavesh Shah, Managing Director & Head of Investment Banking at Equirus, reveals that PE deals in the sector have seen a substantial 60% increase in deal value, rising from Rs 296 Bn in 2022 to Rs 469 Bn in YTD 2023.

Moreover, the healthcare component in the overall PE space has reached its highest level at 13% in YTD 2023, compared to around 7% in 2019.

This shift indicates that alternative capital is increasingly gravitating towards stable businesses like healthcare, deviating from the consumer discretionary investments seen in previous years.

The resilience of the M&A sector is evident in the face of a decline in deal volumes in Q3 2023.

Grant Thornton Bharat Pharma and Healthcare Dealtracker Report reveal 26 deals totaling $2.7 billion, a 32% drop from the same period in 2022.

However, deal values surged by 298% year-on-year, driven by two high-value deals exceeding $650 million each and four deals valued over $100 million each.

Subhakanta Bal, Managing Director at Rothschild & Co, emphasizes the consistent nature of M&A activity in the healthcare and pharma sector in India.

Financial sponsor interest remains robust, especially for differentiated or scaled-up assets, driven by the desire to create platform assets through inorganic roll-up strategies.

Bal identifies significant PE transactions in healthcare services and strong trade activity in pharmaceuticals, particularly in high-growth segments like HPAPI, oncology, peptides, and injectables.

The trend of large Indian companies engaging in domestic consolidation further reinforces the ongoing M&A momentum.

Looking ahead, experts are optimistic about sustained and potentially increased M&A and investing activity in specific segments within the healthcare sector.

With expectations of lower interest rates in 2024, the flow of financial investments is anticipated to rise, keeping PE at the forefront of the deal scene in healthcare and pharma. Platform plays are expected to grow larger, signaling a dynamic landscape for M&A in the coming year.`