‘Consumers heat up deal space’

The booming middle class and humming economy may drive M&A,PE deals in consumer space,says E&Y.

The Indian consumer products sector is expected to see a rise in transaction activity in the next few quarters,riding on increased domestic demand amid economic recovery,global consultancy Ernst & Young said.

According to E&Y,the rise in demand over the last two to three quarters,driven by a recovering economy and a booming middle class,has put the spotlight back on the consumer sector. It is witnessing a rise in interest levels from both the private equity and merger & acquisition standpoint.

“This recent build-up in transaction activity in the consumer space is expected to gain momentum over the next couple of quarters,” Ernst & Young Transaction Advisory Services India partner Ajay Arora said.

Story continues below this ad

The compounding PE interest is seen by three PE deals which happened in quick succession,including Henderson Equity Partners’ investment of around Rs 80 crore in Genesis Colors,the owner of luxury apparel label Satya Paul.

IL&FS Investment Managers acquired a 10 per cent stake in Essar group firm,The Mobile Store,for Rs 100 crore,while Bain Capital & TPG Growth infused Rs 115 crore in Lilliput Kidswear.

The interest in the consumer products space is visible globally as well. The total global deal value in the sector rose a whopping 334 per cent to USD 43.2 billion in the first quarter of this year from USD 10 billion in the fourth quarter of 2009,as per E&Y’s Consumer Products Deals Quarterly report.

There were five deals above USD 1 billion during the first quarter of 2010,the largest deal being the acquisition by Kraft Foods of British candymaker Cadbury for USD 19.2 billion.

Story continues below this ad

“Another emerging aspect of the Indian M&A landscape is increasing outbound interest by Indian companies looking to access new markets,especially in the emerging economies of Africa & South East Asia. Recent acquisitions by Marico,Emami & Godrej Consumer Products in Singapore,Egypt & Indonesia respectively are cases in question,” Arora added.