Q1 signaled positive signs, though some more pain remains
Indian economy broke out of two consecutive periods of contraction to record a 0.4% expansion in the October – December quarter with an improvement in business sentiments as well as consumer demand. Construction sector recorded a 6.2% growth, as compared to the 7.2% contraction in the previous quarter while manufacturing output grew by 1.6%, reversing the 1.5% decline in July – September 2020.
Investment demand, measured by gross fixed capital formation (GFCF), increased by 2.6% as compared to the 6.8% decline in the previous quarter, with capital spending by the government picking up sharply. Private consumption declined by 2.4%, a marginal recovery over the 11.3% contraction in the previous quarter indicating a gradual recovery in consumer sentiments.
Strong start to the year with key transaction closures
The first quarter saw an investment volume of INR 148.6 bn (USD 2.04 bn) on the back of closure of the first phase of Blackstone – Prestige Estates transaction. Though a 45% q-o-q drop, the capital inflows grew by a staggering 3.5 times y-o-y and recorded the second highest Q1 inflows in the last more than a decade. Infact, marquee investors are seeing the current situation as an opportunity to scout good opportunities despite the prevailing headwinds compelling them to put a temporary halt on closures. This is evident from foreign investors accounting for an 85.6% share of the Q1 investments. Blackstone led the largest transaction for the quarter with the PE major partly and fully acquiring 12 completed office, retail and hospitality assets of Prestige Estates, solidifying its leading position in the commercial space of the country. In key transactions in the office segment, Ascendas India Trust made a forward purchase of an upcoming project in North Bengaluru and Varde Partners invested in two projects of Phoenix Group in Hyderabad. As part of its first investment under the Insolvency and Bankruptcy Code, Kotak Special Situations Fund acquired an office asset from Prius Commercial Projects in South Delhi. In another key transaction, Godrej Fund Management bought a 9-acres land parcel in Pune for a commercial development.
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