Mumbai: By any measure, Kaku Nakhate has had great success this year. As the India head of Bank of America Merrill Lynch (BofA Merrill Lynch), Nakhate had in the past few months helped stitch together the most prestigious corporate transactions in the country, including Abu Dhabi-based Etihad Airways PJSC’s investment in Jet Airways (India) Ltd and the world’s largest distiller Diageo Plc’s acquisition of a controlling stake in United Spirits Ltd.

While Nakhate admits that India no longer features among the world’s top five investment destinations, she is convinced that there will be great opportunities to invest ahead of the 2014 general election. “Our aim is to get our clients focused on India to look at opportunities. It is a good idea to get in when the noise is maximum," she says. Excerpts from an interview:

You did some of the biggest deals this year. What were the highlights?

In a challenging environment, and despite the rupee depreciation, we are doing very well this year and, as you have seen, we have participated in most of the landmark transactions year to date. The Jet-Etihad transaction, Diageo’s acquisition of United Spirits, ONGC buying 20% in an oil block in Mozambique for $5.2 billion were all path-breaking deals. Reliance Industries Ltd’s $800 million perpetual bond was the first-of-its-kind from Asia, and Vedanta’s $1.7 billion high- yield bond was the largest by an Indian company till date. It has been a great run for us this year.

Indeed, you were part of the game-changing deals.

Yes absolutely. We have been pioneers in both airlines and liquor industry deals. It is always good to work on mandates that have a novelty factor attached to them and it is a good learning experience for the team. Look at how it has thereafter opened up India’s aviation sector. Also what is beneficial from a franchise perspective is that such landmark deals get a lot of eyeballs from group heads.

Structurally, are the deals getting more complex?

Definitely, they are getting complex. Cross-border deals and intra-regulatory deals with complex tax regulations are on the rise. Every country is evolving its rules, as is India. Structuring capabilities have to be sharpened and we stand out when a deal is complex. We do not structure deals from financing-only angle, but look to add value for clients. We figure out what are the different capital structures available, then look at various options of financing and finally marry the two. It is no longer about just doing a deal. A lot of other things like structuring the deal, financing and assisting in consolidation need to be done.

What are the hurdles that you are facing in deal closures?

Policies have become stricter and buyers are worrying a lot more. A buyer is worried about what might hit the deal-making process, especially on the regulation front. Also, India no longer features in the top five investment destinations—though we are perhaps still in the top 10. So investments are not coming in easily. But then consumer and retail businesses are still seeing a lot of interest. In the last 12 months, aerospace has also become an attractive area. In defence as well, we have moved quite a bit, but financing is not that easy.

Tell us about the toughest deal that you have been a part of.

Definitely the Diageo-United Spirits deal involved a lot of structuring and there were several pieces that had to be timed very well. There was lot of complexity because promoter shares were pledged with different lenders. We have been working on it for years and we had to go through several hoops, but it was a pleasure eventually closing it. Tough deals are lucrative ones too.

But there were more deals in the market. Any regrets?

Yes, may be smaller deals, but we have a clear focus on what kind of deals we want to do. We were there in most of the marquee transactions and that is what matters. It is not necessary that we will win every mandate. But what should be a matter of concern is if we are not getting called for a deal that we want to be in, which rarely happens.

To facilitate growth, a lot of policy announcements are coming up. How do you perceive these changes?

There are too many policy changes coming in too fast. Some of these changes are in the right direction and are coming about after a long time. While these discussions give us a hope that issues will be resolved, these policy changes need to be articulated more clearly and its impact needs to be emphasized in a better way. For instance, the new Companies Act is extremely worrisome for many of our clients. On one hand, we want FDI (foreign direct investment) flows while on the other hand the Act contradicts this goal.

In that case, what are the three main policy changes that you would like to see?

Clear articulation of the manufacturing policy with respect to taxation and easy clearances is very important. We had missed the bus 15 years back and SouthEast Asian nations had gained as a result in becoming global manufacturing hubs. The opportunity to win back lost ground is still there and we should not lose it a second time. But we need to act fast. Development of logistics companies is also needed as it can really address supply issues. Thirdly, the capital markets should be developed in order to lure different pockets of finance. For instance, pension funds from world over should be able to come in. Markets have to be made robust to increase the take out so that various sources of financing are available.

Given that it is an election year, what has been your strategy?

We are known in the market for our investment banking business—M&A advisory and capital markets—and we will strive to add value for our clients. This year we have one-third market share in all announced M&A deals. We have been increasingly focusing on the flow businesses—our transaction services business has doubled in the last three years and we are regularly taking clients away from peers. We have also been able to turn the market volatility to our advantage: the fixed income business has been a big success for us and in equities, market share gains continue to keep us at No. 1.

How do you think the political environment will impact the deals environment?

We feel that there will be good pockets of time to invest ahead of elections. You can make more money when there is noise. Investors can bargain and negotiate better. Our aim is to get our clients focused on India to look at opportunities. It is a good idea to get in when the noise is maximum. Finance ministry is doing lot of good work—money is being infused into banks. Last December, the markets were good. This year also they will be good. Markets will turn.

How do you think the macroeconomic environment is going to pan out?

There is a deceleration in growth and the capital formation has stopped for a while. The turn of cycle will take some time. But we should be keeping a close eye on rural demand. That has not tapered to the extent like urban demand. As an urban citizen I may be stressed about it. But we should have more pockets of excellence, and agriculture has continued to do well.

What will be the story you will be telling us after three years?

We will continue with our strategy and increase our product portfolio. We would like to be one of the market leaders and we will not move away from that focus. Even now we are in the top three slots in all business that we have. The profitability is there if you are in the top three. If we can sort out elections and manufacturing policy, there will be a lot to do as at 60-62 a dollar, India looks very interesting.

So you feel positive about rupee falling below 60 a dollar?

I believe in the 60-62 story. Most manufacturers in India never thought that rupee could depreciate so much. But then in China the currency is getting stronger and costs are going up. If we can get the manufacturing right, I think growth will come back. Growth in IT, top-end technology and manufacturing, etc. will be the key growth contributors.

How has your life changed after you took up corporate banking?

For me taking up a corporate banking job itself was new as I came from the financial markets background. That is when I lost sleep. But there were a lot of well-wishers who wanted me to do this job. And my old bosses wanted me back.

Being a woman banker, how has your experience been?

I have never felt that anyone has treated me badly or I was discriminated. There have been tough times, but being a woman banker was never a hindrance. India is much better than the US in terms of gender equality in the corporate world. You can see that from the number of women that have top jobs in India. If you have a set of principles and you follow them, people will respect you.

On a personal front, what are the hits and misses?

I miss my son who is away in the US doing his undergraduate studies. I do not know what to do in his absence and I get worried about him. But my husband has been my biggest support. In my personal time, I love going to spas. I like travel: South Africa is one place I like to visit. When I see the freedom of animals there, it inspires me a lot.

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