India Inc’s Q2 Deal Value Drops 20%, But Volumes Jump 23% -- What’s Behind the Shift?

India Inc’s deal landscape softened in the second quarter of 2025 with overall deal activity sliding by 20 per cent to $17 billion in value (including IPOs and QIPs) from Q2 2024 even as deal volume increased by 23 per cent to 582 deals compared to same period last year, according to Grant Thornton Bharat’s Q2 2025 Dealtracker report.

The decline in deal activity was marked by a drop in the average deal size to $29.1 billion from $43.7 billion, largely driven by a significant 81 per cent drop in domestic M&A values compared to the previous quarter coupled with absence of high-value deals across segments.

Excluding public markets, the quarter saw a significant drop with 554 deals amounting to $12.8 billion -- reflecting a 13 per cent drop in volumes and a 48 per cent decline in values, marking the lowest quarterly deal value since Q2 2023.

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According to the report, the sharp fall was underscored by the presence of only one billion-dollar transaction with $1.6 billion stake acquisition in YES Bank by Japan’s Sumitomo Mitsui Banking Corporation (SMBC). In contrast, there were six such deals totalling $10 billion in the previous quarter, indicating a marked shift away from large-ticket transactions.

However, private equity remained the dominant force, accounting for 64 per cent of total deal volumes and 58 per cent of overall deal values with 357 deals worth $7.4 billion. Nonetheless, there were no billion-dollar transactions. Among the standouts were IDFC First Bank’s $862 million fundraise, Citykart Retail’s $68 million Series B round, and a $15 million investment in Mythik Entertainment—the largest deal yet in India’s media tech segment.

"The slowdown was largely driven by geopolitical tensions—including the Iran-Israel conflict, policy uncertainties related to Trump’s presidency, the ongoing Russia-Ukraine war, and elevated gold prices—resulting in a cautious investment climate,” said Shanthi Vijetha, Partner, Due Diligence, Grant Thornton Bharat.

M&A activity too was subdued, with 197 deals worth $5.4 billion, marking the lowest quarterly M&A value since Q2 2023. The collapse in domestic M&A value—down 81% from Q1—was due to the absence of billion-dollar deals that had previously buoyed activity. Cross-border M&A also slowed, with outbound deal value falling 74%. In contrast, inbound activity remained relatively resilient with only marginal declines in volume and value.

Initial public offerings also continued their downward trend, with Q2 volumes and value dropping 25% and 26%, respectively, from Q1 levels. Notable listings included Leela Hotels ($407 million), Ather Energy ($343 million), and Aegis Vopak Terminals ($326 million). June, however, offered a silver lining with the second-highest monthly IPO activity so far in 2025.

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Among sectors, retail & consumer, banking, IT & ITeS, and pharma sectors led deal volumes, contributing 55 per cent of total transactions. On the value front, banking & financial services, infrastructure, manufacturing, and automotive sectors accounted for nearly 61 per cent of deal value. The banking and infrastructure sectors alone contributed nine large-ticket deals totalling $4.9 billion.

According to the report, despite global macroeconomic headwinds and waning investor appetite for large deals, green shoots remain visible in selective sectors and public market interest, offering cautious optimism for a turnaround in the coming quarters.

"As conditions global events are stabilising, India’s deal activity is poised to accelerate in the second half of 2025, supported by the country’s strong economic fundamentals,” said Vijetha.