Mumbai: In a Facebook Live interaction with Mint under its programme “Deals Hub", Manisha Girotra, country head for boutique investment bank Moelis & Co., talks about how economic growth and corporate restructuring will prolong a boom in deal-making. Girotra, who previously headed the Indian unit of Swiss bank UBS, said her firm is well-positioned to make the most of the restructuring wave. She added that they are also open for IPO mandates. Edited excerpts:
How do you see 2018 in terms of mergers and acquisitions (M&A) and deal-making?
We have to sort the bankruptcy process and the headline will capture these large bankruptcy cases. We have seen a lot of private equity (PE) players in consumer, healthcare and other spaces, and will continue to see more activity from them along with domestic consolidation—not just through the NCLT (National Company Law Tribunal) format but outside of it too because scale is becoming very important.
Therefore, it’s important for domestic firms to acquire size and I expect 2018 to be a very good year.
In the NCLT process, do you see a certain kind of bias towards strategic investors?
Strategic investors by nature have a competitive advantage as they are able to take a longer term view to buy and hold an asset. Strategic investors do tend to beat other investors in the process.
You have been a global banker; can you give us the positives and concerns for investors who are looking at India?
Till last year, growth had slowed down globally. Some growth was coming back to India, which was a pretty good sign, as exports would go up and markets would do well.
For not only the strategic but also financial investors, India is in a sweet spot. With strong governance and more than 6% economic growth, it’s a big positive for us.
The consumption story is quite robust. All of these things have come out in a good way for us. Confidence remains high as the currency is stable, and markets are at a high too.
The year 2016 saw large number of deals and we continue to see the same trend in 2018. The current year will definitely be better than 2017 because of the whole NCLT process. Work has already started in the last quarter and will get closed this year.
We will see more foreign direct investment (FDI) coming into technology, pharmaceuticals, steel, and oil and gas sectors. We will see some more sectoral consolidation in the coming days.
Will we see the Competition Commission of India (CCI) playing a big role in these large consolidation deals?
If we see globally, regulators have played an active role in terms of large deals happening. Now we are at a scale where these large deals will get materialized and make an impact. We will see regulators getting active.
What has changed in terms of willingness to buy companies? Are big ticket deals normal for the country now?
Five years ago, the conversation used to be about cross-border opportunities. India, in terms of consolidation, was never an option. I think now people want to have a conversation around Indian opportunities. People are willing to sell their business and move to another, and buyers are willing to pay as they can see the benefits of scale playing out.
What are the top three trends that you see in the deal-making environment currently?
The three important trends I see that will help deals in the current scenario will firstly be the complete NCLT process; the other important one being the outbound deals in pharma and consumer tech sectors, and last but not the least tech consolidation.
What are the valuations looking like?
Public markets have very good valuations but are skewed to certain sectors. All the consumer-oriented sectors probably are going to public markets now.
There was a term, ‘confidence capital’, that kicked in with Axis Bank fundraise. Will we see that in other banks?
We saw many state-owned banks raise capital in the public markets and will see more of them coming in. The underlying business is good. We are going through the deleveraging phase in India. Somewhere, growth got overestimated and leverage was built up. We will see confidence capital coming in, especially for cases out of bankruptcy.