Money & Banking

‘The India growth story has never been so attractive’

Thomas P Abraham Bengaluru | Updated on January 09, 2018

AJAY GARG Founder MD & CEO, Equirus Capital

Competition for most M&A deals will come from PE investors, says Equirus Capital’s Ajay Garg

Equirus Capital, a boutique investment bank, backed by prominent investors like Rakesh Jhunjhunwala, has achieved success at a time when global investment banks have shrunk their operations significantly in India. Founder MD & CEO Ajay Garg, a veteran of 20-plus years in investment banking, believes more corporate assets will be available for acquisition as lenders to companies with stressed assets push for change of management control. Excerpts from an interview:

How many transactions did Equirus close in the last financial year?

Equirus closed around 18 transactions in the last financial year, which was a good mix of private equity, merger and acquisition, structured finance and capital market transactions across sectors.

Notable amongst these were the sale of Search Technologies to Accenture, PE funding for Republic TV, IPO for Shankara Building Products, QIPs for Minda and Syndicate Bank, and sale of road assets of GR Infra.

Tell us about the changing trends in investment banking. Which sectors will see major M&A and PE investment activities this FY?

With around $23 billion raised via IPOs/QIPs in the last 18 months, and given the strong interest in Indian equities, we are clearly seeing corporate attention focussed on accessing the capital markets.

This has clearly seen volumes come down in the M&A market, from $37 billion in the previous year to $5 billion in the last six months.

However, based on the previous bull markets, after all this capital raising, we will see significant corporate action in the M&A space.

Equirus believes the following trends will mark the next set of M&A and PE investments.

First, the focus will be clearly on domestic markets, and not overseas acquisitions.

The India growth story has never been so attractive and is requiring greater capital allocation. So, remaining focussed on India is clearly on top of the agenda for most corporates .

Second, the competition for most M&A deals will come from PE investors.

Wherever existing managements have a critical role in their companies, we see them go with the PE investors.

PE has evolved and is now looking at many more businesses — from infrastructure assets and capital goods to consumer durables and financial services.

It is aggressively competing in the space which, at times, is dominated by large corporate groups. Lastly, we are finally seeing Indian banks not being indulgent with managements who have not met their loan-servicing obligations.

With debt providers of stressed assets pushing for change of control, we will see an impact on the corporate psyche and that will result in far higher corporate assets being available for acquisition as managements try to bring in financial discipline and get out of non-core assets to work with manageable debt levels.

How was 2017 for Equirus Capital overall?

Equirus had a healthy 2016 and the momentum has continued in 2017.

While the deals completion time for M&As has been longer, the pipeline for capital markets look stronger in the current market.

Also, the portfolio management service (PMS) which we started in October 2016, got off to a good start, and performed well to give 60 per cent returns.

How is competition in the mid-market segment?

The Indian investment banking scene has rapidly changed from being led by foreign bulge bracket firms in the early 2000 to domestic mid-market players lately.

Sure, we see growing competition in this segment. But, this competition is not on the scale of operations; it is on the sector of expertise.

More innovative strategies are required to fit the needs of growing businesses; so your domain expertise will help you stand out from the rest.

Published on December 21, 2017

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