Mumbai: Narayan Ramachandran, India head of Morgan Stanley, expects share sales in the country to surge as companies seek to expand, and said Indian firms are poised to resume global acquisitions helped by the rupee’s strength and low valuations.
Investment opportunity: Morgan Stanley’s Narayan Ramachandran says the firm has invested $700 million in India’s real estate sector.
Indian companies could raise roughly $70 billion (Rs3.24 trillion) through share sales over the next three years, provided markets remain strong, Ramachandran, who has been with Morgan Stanley since 1996, told the Reuters India Investment Summit.
He also said talk of looming asset bubbles in India was “hogwash”.
“Credit growth, for the first time in India, is under depositary growth, which is why there’s no bubble,” Ramachandran, who has 20 years of investment experience, said in Mumbai. “People don’t even know how to use the word bubble any more.”
He also said the time was right for Morgan Stanley’s global real estate and infrastructure funds to invest in India.
“If you take a 20-year view, it will be a mega bull-market run in real estate in India. We have to rebuild the entire real estate stock in the country,” Ramachandran said.
Morgan Stanley has invested $700 million in the country’s real estate sector, and is looking at residential and special-use developments, he said.
Morgan Stanley separated from its former India joint venture partner JM Financial Ltd in 2007, and has gone on to build a full-service investment bank, with sales and trading, fixed income, commodities, derivatives, research and asset management offerings, and 400 employees in its onshore business.
Indian companies have raised $18 billion by selling new shares this year, and a long list of firms are queuing up with initial public offers (IPOs) and secondary offerings in Asia’s third largest economy. By contrast, they raised $7.1 billion in all of 2008.
Morgan Stanley, which did not figure among the top 10 of the Thomson Reuters equity capital markets league table for India in 2008, tops it this year with a market share of 18.2%.
Ramachandran expects Indian firms to sell between $20 billion and $40 billion in equity a year for the next three years, with stake sales in state-run firms to total $10-15 billion.
Offerings from energy and infrastructure firms would continue, and telecom firms were set to tap capital markets to finance billions of dollars needed to build third-generation (3G) mobile networks in the country.
The first life insurance companies are also widely expected to begin going public in 2010.
Telecom companies are expected by analysts to shell out $1.5 billion on 3G spectrum alone. Building the high-speed wireless networks will cost billions of dollars more.
“I would think we will raise far more in infrastructure, and other sectors of the economy next year in India, but as an actionable theme, this is live, it’s big, it’s now,” he said of 3G.
“The insurance theme will come, probably the next mega-capital raising event,” he said.
A strengthening rupee and lower valuations overseas will drive a new wave of foreign acquisitions, Ramachandran said.
“The combination of your currency got better and their asset valuations are cheaper, combined with a new tendency of reverse imperialism, makes for outbound M&A (mergers and acquisitions),” Ramachandran added.
After a strong 2007, when Tata Steel Ltd bought Anglo-Dutch steel maker Corus Group Ltd for $13 billion, once-acquisitive Indian companies had mostly gone quiet as the global economic crisis crippled access to funding.
But with a thaw in credit markets, Indian companies are once again looking to make big overseas deals.
Energy firm Reliance Industries Ltd has announced an offer to buy a majority stake in bankrupt Luxembourg-based petrochemicals maker LyondellBasell Industries AF in a deal valued by sources at between $10 billion and $12 billion.
Essar Oil Ltd, meanwhile, is in exclusive talks with Royal Dutch Shell Plc on the sale of three European refineries, which media reports have valued at £1-1.5 billion (Rs7,700-11,550 crore).
The rupee has strengthened at least 5% against the dollar so far this year, helped by strong inflows as funds bet on India as an emerging market.