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Indian companies are seeing growing interest from strategic investors led by Japan, Korea, and Thailand, as they look to diversify supply chains from China, Utpal Oza, head of investment banking, India, Nomura, said in an interview.

“Since March, with the shift in sentiment to reduce dependence on a single country, we are seeing increasing interest from international companies wanting to invest in India. Interest is largely from Asia led by Japan, Korea and Thailand, but we are also seeing interest from Europe."

Some enquiries are in sectors such as agrochemicals, building products, logistics, packaging, and new-age technology, including electronics, Oza said. One has not seen significant interest in these sectors the past, he said.

“This trend has also been encouraged by countries such as Japan providing incentives for local companies to move production facilities and India’s own production-linked incentive scheme. There is growing interest in the consumer and retail sector as well," said Oza.

Strategic investors are exploring fresh investments in India, while on the private equity side, investors are chasing investments in pharma. Diversification of supply chains is also one of the factors driving private equity interest in this sector.

Several major buyouts have already been announced this year. These have been led by large deals, such as KKR’s $414 million acquisition of JB Chemicals and Pharmaceuticals Ltd and Carlyle’s $210 million acquisition of SeQuent Scientific Ltd.

“Pharmaceuticals is definitely the most sought after sector at present. There are a few things that are playing out right now. Intrinsically, it is a defensive sector. So the vagaries in terms of business cycles don’t affect pharma. There is visibility as well as sustainability of earnings that acquirers can estimate clearly. Companies were always under-leveraged in this sector, so the ability to use financial leverage to boost returns makes it attractive and you have lenders such as Nomura who are very active in this space," said Oza.

There is also a move to diversify the supply chain because of geopolitical tensions and people are testing what can happen in India, Oza said. Nomura is also bullish on the equity capital markets, which has seen one of the best years ever, despite a raging pandemic.

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