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The mergers and acquisition in India has declined by 20% registering only 42 transactions worth $899 million in August. Interestingly, according to assurance, tax and business consultancy firm <keyword id="1903156" type="PERSON" weightage="20" keywordseo="Grant-Thorton">Grant Thorton</keyword>, 47 deals worth $1.27 billion were recorded in August 2014. 
	 
	"M&amp;A remains subdued with volumes remaining about the same but deal values coming down by about 20% as compared to same period last year. Most part of the M&amp;A deal value has actually come from inbound investments," said Grant Thornton India LLP Partner Prashant Mehra. 
	 It should be noted that till August, the tally for <keyword id="45665" type="UNKNOWN" weightage="20" keywordseo="MA-deals">M&amp;A deals</keyword> have reached $21.23 billion recording 364 transactions. However, this is a tad lower than that recorded in the January-August period of last year, which was 367 transactions worth $22.18 billion. 
	 
	"This seems primarily because the corporate balance sheets continue to be stretched for cash to invest in inorganic growth and also foreign assets having become expensive due to the recent rupee depreciation," Mehra said. 
	 
	The report noted that M&amp;A deal value has actually come from inbound investments, whereas domestic M&amp;A activity and outbound transactions have been falling behind. 
	 
	However, it has been projected that the tally is likely to improve in the coming months for domestic and outbound M&amp;As.

India sees 20% decline in  M&A deals

<ul><li>In May 2019, India saw M&amp;A transactions worth $3.4 billion and PE deals worth $1.1 billion take place, according to a report by Grant Thorton.</li><li>When compared to April 2019, the deal volumes have dropped by 29% although deal size grew by 6%. </li><li>Startups led the PE deals with companies like <keyword id="2466939" type="PERSON" weightage="20" keywordseo="Grofers">Grofers</keyword> and <keyword id="53463" type="COMPANY" weightage="20" keywordseo="blackbuck">Blackbuck</keyword> raising big money in May 2019.</li></ul>The election month did not go down well with investors. In May 2019, there was an 83% drop in deal value for the month as fewer <keyword id="496458" type="PERSON" weightage="20" keywordseo="PRIVATE-EQUITY-DEALS">private equity deals</keyword> closed, as did mergers &amp; acquisitions. India witnessed 33 M&amp;A transactions and 48 PE deals worth $3.4 billion and $1.1 billion for the period, according to a report by Grant Thorton. The number of deals too dropped by 17%, the report said. When compared to April 2019, the deal volumes have dropped by 29% even as the deal size grew by 6%. Indian startups led the PE deals with as many as 25 deals closed for the month accounting to $325 million. The e-commerce sector saw just three deals but their combined size worth $229 million. The biggest investments included $200 million funds raised by Grofers from Japanese investment firm Softbank. Logistics firm Blackbuck too raised as much as $150 million. Interestingly, both the companies are in the running to become the next unicorns of India. In the first quarter of 2019, India had saw a flurry of activity in the PE and venture capital space. PE-VC firms invested $10 billion in the country via 159 deals, according to data research firm <a href="http://ventureintelligence.blogspot.com/2019/04/private-equity-investments-up-26-to-10.html">Venture Intelligence</a>.

India's PE and M&A deal values in May 2019 dropped by 83% from last year

The National Spot Exchange Limited (<keyword id="6405757" type="COMPANY" weightage="20" keywordseo="NSEL">NSEL</keyword>) scam hit investors have demanded the management to invoke Settlement Guarentee Fund (SGF) to partly pay off the investors. In a strongly- worded letter to Saji Cherian, the current managing director and CEO of NSEL, <keyword id="6558736" type="PERSON" weightage="20" keywordseo="Ketan-Shah">Ketan Shah</keyword>, a distressed investor has questioned the delay in the initiation of the process. “To our surprise in spite of passing of 14 months after the default of NSEL and several reminders from our side, you have not invoked this clause. We know from <keyword id="92906" type="COMPANY" weightage="20" keywordseo="FMC">FMC</keyword> that you have sought legal opinion and now you have a legal nod to go ahead with this invocation,” wrote Shah, also one of the founder member of NSEL Investors’ Action Group, in the email sent to Saji Cherian of NSEL. 

	He further added, “Please let me know what is the reason behind dithering on this front as 13,000 families can get some relief if you invoke this clause and reconstitute the SGF which is clearly mandatory as per your own by-laws signed by all 'clearing members' i.e. brokers of NSEL.”
 

	Interestingly, an independent forensic audit carried out by Grant Thorton on behalf of the commodities regulator Forward Market Commission revealed that the Exchange had utilized its Rs 800 crore SGF to meet pay-in shortages of paired contracts.
 

	“We observed pay-in shortages on a daily basis, with regard to the settlement-related payment obligations from various members. All these shortages were substantially in relation to paired contracts. The exchange made the pay-out obligations against the pay-in shortage of paired contracts out of the available SGF cash balances. This resulted in depletion of the SGF cash balances,” the auditor had said in a supplementary report last year.
 

	According to bye-law no 12.9.2 of NSEL, "If the cumulative amount under all the above heads is not sufficient, the balance obligations shall be assessed against all the clearing members in the same proportion as their total contribution and deposit towards security deposit, and the clearing members shall be required to contribute or deposit the deficient amount in the Settlement Guarantee Fund within such time, as the Relevant Authority may specify in this behalf from time to time," emphasized Shah in his email.
 

	Shah has also demanded an immediate response from Cherian and has warned that a lack of response would be held against him in the court. 
 

	Shah has also made the email communication to the Ramesh Abhishek, chairman of FMC as well as Minister of Commerce and Industry, Nirmala Sitharaman. 
 

	The NSEL investors, on Saturday, filed a Special Leave Petition in the Supreme Court, challenging the Bombay High Court order granting bail to prime accused Jigesh Shah.

Distressed Investors Want NSEL To Invoke Settlement
Guarantee Fund

Lack of strong internal audit mechanism along with over-riding powers of the top management in the companies have resulted in corporate frauds in India. The corporate frauds have risen by over 45% in the last two years. According to a joint study conducted by <keyword id="6355988" type="CITY" weightage="20" keywordseo="Assocham">ASSOCHAM</keyword> and Grant Thorton, corruption, money laundering, tax evasion, window dressing, financial reporting fraud and bribery are some of the common corporate frauds occurring in <keyword id="46431" type="CITY" weightage="20" keywordseo="India-Inc">India Inc</keyword>. 
	 
	“Over 65% of our survey respondents agreed to witness a rising trend of willful defaults and frauds. The survey observed that the lurking risk of frauds has been dissuading global companies from investing in India,” states the report. 
	 
	Sectors Affected By Corporate Frauds 
	 The survey has revealed that several sectors across industries have been victims of <keyword id="136472" type="UNKNOWN" weightage="20" keywordseo="Corporate-fraud">corporate fraud</keyword>s in India. Nearly 52% of the corporate frauds have happened in real estate and infrastructure in the last two years, while financial services sectors recorded 34% frauds. Telecom, manufacturing, electronic goods and IT and ITes sectors have recorded a meager 5%, 3% and 2% corporate fraud respectively. 
	 
	“Procurement frauds, payrolls frauds, asset misappropriation, financial misstatement, corruption, bribery, tax evasion, piracy, intellectual Property (IP) fraud, kickbacks, accounting frauds, counterfeiting, white-collar crimes etc are swiftly threatening business in both the private and public sectors,” added the report. 
	 
	The fall 
	 
	A corporate fraud will always have ripple effect on the overall business of a company. Apart from the financial losses that the victim has to incur, a fraud also makes a dent in the brand and the reputation of the company. “Corporate wrongdoing inevitably ends up creating a vicious cycle that hurts shareholders value, damages investor’s trust, leads to locking-up of capital in litigation, and ultimately causes wider financial market instability; eventually becoming part of much larger problems,” said DS Rawat, general secretary of ASSOCHAM. 
	 
	In terms of what was the biggest concern for India Inc, a majority of the respondents (over 66%) said that their biggest concern was about the impact of the fraud on the brand image of the company. On the other hand, 26% the companies were worried about the financial losses that company incurs at the end of the fraud. “Intentional fraudulent financial reporting, information manipulation, theft of inventory etc. are among the common types of misconducts that can result in financial losses for companies,” suggested the report. 
	 
	The Future 
	 
	About 71% of the companies expected cases of corporate fraud to increase in the next five years. “Bribery, corruption and regulatory noncompliance are the top frauds that the respondents have experienced in the past two years,” asserted the report. 
	 
	However, companies are becoming more aware of the need for an internal mechanism to keep a check on the incidents of frauds within the companies. Among other measures, policies that support whistleblower and independent and external audits have been ranked as effective tools to mitigate the risks of frauds. 
	 
	“The exchequer suffers massive losses each year, usually running into several crores of rupees because of an array of frauds. As per the reports from the RBI, during the period 2012-13, 29,653 cases of fraud were detected in India’s nationalized banks, totaling Rs 24, 828 crores,” disclosed the study.

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India sees 20% decline in M&A deals

BI India Bureau

India's PE and M&A deal values in May 2019 dropped by 83% from last year

Sanchita Dash

Distressed Investors Want NSEL To Invoke Settlement Guarantee Fund

Purba Das

Corporate Frauds In India On The Rise

Purba Das

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