Deal activity in the Indian startup sector significantly declines in 2023

In 2023 year-to-date, the Indian startup sector witnessed a substantial decline in deal activity compared to the same period in 2022, as indicated by Grant Thornton Bharat's 'Q3 Deal Tracker Report.' This decline is notable, with a 39 percent decrease in the number of deals and an even more substantial 68 percent decrease in their total values. The most significant dip was in the mergers and acquisitions (M&A) landscape, where values plummeted by a staggering 83 percent compared to the previous year. This drop is largely attributed to the absence of massive billion-dollar deals that were prominent in the year-to-date period of 2022.

The private equity (PE) sector also experienced a decline, with a 40 percent reduction in the number of deals and a 28 percent decrease in their values compared to the same period in 2022. In the third quarter of 2023 (July-September), the Indian startup sector, along with e-commerce and IT & ITeS, dominated the deal landscape, accounting for 64 percent of the total deals.

The report remains optimistic about India's economic prospects for 2023-24, highlighting growth-oriented policies, subdued inflation, and increased investments in infrastructure as key drivers. This positive outlook is expected to fuel deal activities, particularly in traditional sectors such as pharmaceuticals and healthcare, and in the ever-expanding digital transformation landscape, which encompasses e-commerce and IT & ITES.

India's domestic growth is set to benefit from these factors, potentially rejuvenating deal activities in various sectors. The Q3 of 2023 saw 302 deals with a combined value of $13.4 billion taking place in the country, suggesting some resilience and recovery in the market.

Shanthi Vijetha, Partner, Growth, at Grant Thornton Bharat, emphasized the role of growth-oriented policies, reduced inflation, and increased infrastructure spending in bolstering India's economic growth. These factors are expected to stimulate deal activities in both traditional and digital sectors, making India an attractive destination for investments and business deals in the coming years.

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