M&A deals involving Indian cos halve to $ 7.7 bn in Jun qtr

NEW DELHI: With high inflation and weak stock market playing spoilsport, total value of M&A deals involving Indian companies more than halved to $ 7.7 billion in the June quarter, says global consultancy firm Ernst & Young.

The last three months witnessed 212 M&A deals with a disclosed deal value of $ 7.7 billion.

"This deal value is approximately 55.3 per cent lower than the previous quarter's value of $ 17.3 billion (January--March 2011)," global consultancy E&Y said.

The number of deals also dropped over six per cent as compared to 226 recorded in the January quarter.

"After regaining momentum in the previous quarter, M&A activity in India has again slowed down owing to rampant inflation, dented stock market sentiments and concerns over GDP growth expectations," E&Y Partner and National Director (Transaction Advisory Services) Ranjan Biswas told PTI.

Inflation has stayed unusually high this year, defying the government's earlier expectations of a slow down to 6.5 per cent by March. The stubbornly high prices have forced the Reserve Bank of India ( RBI) to embrace a hawkish monetary policy, which, in turn, has pushed financing costs higher.

Headline inflation stood at 9.06 per cent in May. The central bank has hiked key rates ten times since March 2010, with an aim to tame the escalation in prices.

Meanwhile, the stock market remains shaky; Bombay Stock Exchange's benchmark index Sensex has dropped three per cent or 599 points in the last three months.

As per E&Y, average deal size declined to about $ 90 million in the June quarter as compared to $ 192.4 million in the three months ended March.