Companies

'We expect 2021 to be a good year for IPOs and bonds'

Rajesh Kurup | Updated on January 31, 2021

Shardul S Shroff, Executive Chairman of legal firm Shardul Amarchand Mangaldas & Co

Shardul Shroff also foresees a renewed push for disinvestment and a bumper year for investment banking

For the third year in a row, Shardul Amarchand Mangaldas & Co topped the mergers and acquisitions (M&A) charts in 2020 with the legal firm advising 110 deals worth $41 billion, despite the challenging economic climate. While it takes 3-6 months to complete an M&A transaction, the legal firm closed an average of two deals per week. About 20 other deals were not successful.

The New Delhi-headquartered firm, which employs nearly 600 lawyers, was an adviser to many of the investors in the Reliance Industries Ltd’s (RIL) fund-raising spree, and advised the Mukesh Ambani company in the Future Retail deal. According to Shardul S Shroff, Executive Chairman of Shardul Amarchand Mangaldas, while Indian regulators are quite sensitive to change, deals generally stall on valuations. Excerpts from an interview.

On the M&A front, 2020 started on a tough note, and worsened with the lockdown. When did the tide change?

The first four or five months of the year were difficult, but after May it began picking up pace, with the last two quarters recording high growth. By May, Covid-19 had already played out for some time and cross-border transactions were expected to return to normal. So investment levels went up.

But many deals didn’t succeed?

About 20 deals did not fructify, mainly due to promoter issues such as non-satisfactory valuations and due diligence, among others. A lot of deals happened later in the year. Apart from 110 M&As, we did quite a number of public offerings, Infrastructure Investment Trusts and Real Estate Investment Trusts.

Was there a rise in the number of stressed assets coming to the market, leading to more deals?

Because of the moratorium [on restructuring], a lot of stressed assets did not come into the market. Those in the market were the older ones, where judgements were pending. I don’t think it was because of the stressed assets, but due to new funds and monies. Much of the stressed assets, I hope, will come to the market this year as policies are put in place and the moratorium ends on March 31 (some banks have extended it to the end of this fiscal).

RIL raised $27.3 billion in fresh capital last year, and your firm was the advisor for both Reliance Industries and the investors?

In the major deals where Jio platforms raised funding from 14-15 new investors, we acted on behalf of most of the investors. In the Future Retail deal, we acted for RIL.

The Future Retail deal was complex. When is it expected to close?

Future had built up losses that were highly complex to handle. Further, as there is an arbitration on between Future Retail and Amazon, depending on how that goes, it may close before March 31 or spill into the next financial year. We expect the deal to close in this calendar year. This was the most difficult deal for us in 2020, even though historically we have done much more complicated deals.

However, things slowed on the Insolvency and Bankruptcy Code (IBC) front?

Last year, it was left to the banks and financial institutions to do voluntary restructuring, and hence it didn’t result in a large number of IBC closures, even though there were some major closures. The year 2020 was not bad for IBC, but it was not good either as it was dealing with past cases due to the moratorium. New filings did not happen.

On the policy and regulatory front, are these hampering fund-raising and M&A deals?

I think the markets are functioning well and the regulators are sensitive to change and they are also quite active. But a lot of investment strategies would depend on the announcements in the Budget.

2020 was a record year for fund-raising through initial public offerings (IPOs), rupee bonds and other modes. Why?

I think people understood there was liquidity in the market and lack of opportunities for investment. So they went for fresh opportunities.

How do you see 2021 panning out for IPOs, bonds and Investment Banking, as well as divestment?

After a record year for IPO and bonds, we expect 2021 to follow the same pattern. The IPO market is still very strong, while companies will be looking to raise funds through debt or equity. Last year also the Government had a pretty big divestment target, but market conditions were so bad it couldn’t be achieved. We are expecting large deals such as Air India and Bharat Petroleum Corporation this year. However, targets may not be achieved as market conditions are not conducive. On the IB front, I think it will be a bumper year with all the pent-up demand.

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Published on January 31, 2021
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