The $3.2 billion merger between Bandhan Bank and Gruh Finance was the biggest M&A deal struck in the first quarter of 2019.

India Deal Activity Declined Sharply In January-March 2019, Says EY

Deal activity in India witnessed a sharp decline in the January-March 2019 period, amid a subdued global deal market and uncertainty around 2019 Lok Sabha election results, according to a report by consulting firm EY.

January-March 2019 witnessed two mega M&A deals (over $1 billion) in the domestic arena. The largest deal was the $3.2 billion merger of Bandhan Bank Ltd. and Gruh Finance Ltd. It was followed by Tata Group-led consortium's $1.2 billion investment in GMR Airports, the report said.

According to EY's 32nd Transaction Quarterly Report, mergers and acquisitions in the first quarter of 2019 fell to 242 deals valued at $9.9 billion, from 260 M&A deals valued at $21.6 billion in the year-ago period.

"After a record year for India M&A, deal makers paused a little in the first quarter of 2019, thanks to a subdued global M&A market. Besides, the uncertainty around general election results also appears to have added to the sub-par performance," said Ajay Arora, partner and national leader (M&A) at EY India.

However, going ahead, the deal environment in India remains favourable, the report said, adding that 66 percent of Indian executives expect to actively pursue M&A deals in the next 12 months. This optimism is significantly higher than the 32 percent recorded in April 2018 and the 10-year average of 40 percent.

"The long-term prospects for the Indian transactions market look good on the back of stable economic growth outlook, ongoing consolidation and restructuring activities," said Amit Khandelwal, partner and national leader (transaction advisory services) at EY India.

Domestic deals continue to dominate Indian M&A, with 158 deals accounting for an aggregate disclosed deal value of $7.1 billion. This contributed around 65 percent to the total deal volume and about 72 percent to the total disclosed deal value.

While consolidation remained the primary deals driver, financial deleveraging, faster pace of insolvency proceedings and opportunistic buys by the big industry players also added to the push.

The report further noted that while inbound deal value increased by 21 percent, outbound deal value declined by 53 percent on a year-on-year basis.

The U.S. continued to be the most active cross-border M&A partner for Indian companies during the quarter, with a total of 28 deals (14 inbound and 14 outbound deals) totalling to $840 million.

Japan and Germany emerged as other favourite trade partners.