With a stable government returning at the Centre, how do you see the deal market performing?
Distressed assets deals have been a dominant theme in the M&A space in the last two years and we expect that trend to continue. Distressed M&A deals worth $17 billion have been announced or completed in the last two years and comprised 14% of all mergers and acquisitions in India. The IBC regulation and process is at an inflexion point and supportive regulations and further efficiencies will make this a bellwether theme for the coming years.
By when do you expect the IPO momentum to pick up?
We believe IPO activity will likely pick up momentum towards the second-half of the current calendrer year. Currently, there is a backlog of companies which have received Sebi clearance for launch of IPOs in the near term, subject to markets and investor interest. Additionally, new issuers have begun work for their IPO launches in the current fiscal. Financials and consumer sectors will likely continue to dominate the IPO pipeline, followed by the real estate and infra sectors. Offer for sale in IPOs by PE investors will also be a dominant theme. Investor feedback suggests that they are on the lookout for IPOs of differentiated businesses and sector leaders with a great track record.
Can REITs and InvITs in India entice enough investors?
The response to the Embassy REIT IPO demonstrated that investors look for investment themes which offer a good mix of yield and growth, along with excellent sponsor pedigree. We expect REIT issuances from highquality promoter/ sponsors. Over time, we expect a vibrant REIT market to evolve in India. While the first couple of InvIT listings did not invoke a good aftermarket listing and trading, we are witnessing deal traction with issuers from infra related sectors to launch InvITs on a private placement basis to global yieldfocused investors.
What are the views of foreign long only funds on Indian markets, valuations and corporate governance?
Given rising global concerns around trade wars and slowdown in growth, India is emerging to be a preferred destination with many global investors. The outcome of the latest elections has been a shot in the arm in this regard. Having said that, global investors will be focused on the intensity of new reforms to drive growth without too much impact on the fiscal situation. India continues to trade at premium valuations in many sectors given its potential for growth. Investors currently prefer to invest in large liquid names and are reasonably selective about mid-caps. Corporate accidents in the recent past have made investors wary about governance track record and hence they ascribe a valuation premium to well-governed companies.
Are distressed assets driving the M&A market?
Distressed assets deals continued to be a dominant theme in the M&A space in the last two years and that trend would continue. Post IBC, distressed M&A deals comprised ~14% of all mergers and acquisitions in India. Efficacy of the NCLT process has led to increased opportunities in the IBC and pre-IBC phase.
In the M&A space which sector will drive the market going forward?
We believe sectors like FIG, consumer and retail, technology and digital will continue to have substantial deal activity. There has been resurgence of the domestic acquirers where Indian companies are looking for opportunities in their core business areas to grow market share or expand their geographical reach. Further, there has been increase in stock for stock transaction driven M&A.
