Mumbai: Hot on the heels of the biggest ever inbound takeover deal involving Indian promoters—Japanese drug firm Daiichi Sankyo Co. Ltd buying stake in Ranbaxy Laboratories Ltd—Kotak Mahindra Capital Co. Ltd is organizing a two-day ideation conference for Japanese companies in Osaka and Tokyo this week to explore potential deals.
An eight-member team from the investment bank, headed by Falguni Nayar, its managing director, will meet more than 25 large corporations in Japan to present mergers and acquisitions opportunities in India.
“There is strong strategic fit between companies in Japan and India,” said Uday Bhansali, executive director of the investment banking wing of publicly listed Kotak Mahindra Bank Ltd.
There could be large deals involving companies in these two countries in the next two-three years, the Kotak investment banking team believes.
Sourav Mallik, associate director of investment banking at Kotak, said apart from pharmaceuticals, sectors such as automotive, heavy engineering, telecommunications, power and manufacturing sector could witness inbound deals in India, involving Japanese strategic investors.
On the other hand, in sectors such as information technology, there could deals where large Indian companies take strategic equity stakes in Japanese firms.
Japanese firms are opening up to cross-border mergers and acquisitions, after being inward looking for some years, said Bhansali. They are looking for cheaper manufacturing base and historic political tensions between Japan and China make India an attractive market for them, he said.
From the perspective of some large Indian firms, “strategic tie-ups with large companies in Japan will reduce their dependence or exposure to the US markets,” said the head of investment banking at a foreign bank operating in India, who does not wish to be named.
Language barrier is one of the hurdles for deals involving India and Japan, said Bhansali.
However, with increasing business tie-ups, this barrier will give way to “strategic business fits”, he said.
Also, the willingness of Japanese banks to participate in buyouts funded by debt, and acquisition financing in general, will help companies there looking for large deals involving India, he added.
Kotak has formed an alliance with Japanese investment bank GCA Savvian Group Corp. to look for business in thissegment.
The Ranbaxy deal will also have another significant impact, Bhansali said. “Indian promoters are increasingly becoming dispassionate about business ownership.”