M&A wave likely to continue in ’08

Jan 01, 2008
Ashish Rukhaiyar
MUMBAI

THERE are some things that get bigger and better with time. While the ‘better’ part may be debatable, bigger is certainly the case when it comes to mergers and acquisitions. As the new year rings in, experts are betting on another great year for India Inc in 2008.

Investment banking circles predict that sectors like IT, telecom, financial services and infrastructure will be in the midst of M&A activity in the current year. Even as sectors like retail and insurance are coming into their own, bankers feel that one can wait for more clarity in guidelines before taking a call.

Indeed, the ingredients are all there. India recently became the 11th trilliondollar economy in the world. In terms of dollar millionaires, India ranks eighth. The year just gone by witnessed a stupendous rise in the quantum of M&A activity in the country with quite a few deals above the $1 billion-mark in size.

In 2007, India attracted deals worth $68.32 billion, significantly higher than $28.16 billion in 2006 and $18.35 billion in 2005. Between 2003 and 2007, the value of outbound deals more than doubled each year, resulting in a compound annual growth rate of 108%. Of the total deals, M&A accounted for $51.17 billion while the remaining $17.14 billion was in the form of PE investment.

“There is no reason to believe that the M&A scenario will be subdued this year,” says S Ramesh, executive director, Kotak Mahindra Capital.

Financial services, especially brokerages, have been in the limelight in 2007. And if indications are anything to go by, then 2008 will be no different. Brokerages including Emkay and Networth are but some names being touted about looking at strategic investment opportunities. The bullish stock market has led to an increase in the valuations of all brokerages that are said to be ready to offer stake given the right price.

Entities like India Infoline, Indiabulls, Anand Rathi Securities, Karvy Stock Broking, JRG Securities and Geojit Financial Services all attracted private equity investment in 2007.

In the telecom sector, tower infrastructure companies are slated to create headlines. Entities like Bharti Airtel and Reliance Communications have floated subsidiaries for cell towers and sold minority stakes at huge valuations. Even the Tatas and Ruias have floated such subsidiaries. There is no doubt the current year will see a lot of deals in this sector, feel experts.

In the IT sector, deals like that of Genpact and Citi’s BPO services may see the light of the day this year. On a different note, retail is not finding many supporters as many feel that the sector still does not command size.