‘Banking and retail sector have the potential of noteworthy acquisitions’

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: Even though the markets as such are still to demonstrate a definite movement, it hasn't dampened the spirits of corporations to acquire potential companies. In fact, the way acquisitions like the HDFC-Centurion Bank of Punjab, ICICI-Sangli bank have been taking place; it seems that there are still value investments left in the markets against the perceived notion of no or slim opportunities.

Rajesh Naidu and Rahul Jain of The Financial Express spoke with Prashant Kothari, fund manager of the recently launched ICICI Prudential Focused Equity Fund about the things investors need to keep a tab on about an acquisition. He also spoke about the reasons of launching an equity fund, which focusses on top 200 companies according to market capitalisation.

In which sectors do you foresee potential acquisitions?

Primarily, one should understand that any acquisition is not based only on the potential of a sector. It is more specifically based on the value that a company in a particular sector holds and its ability to deliver performance time and again.

Also, one has to take into account whether the market price of the company is justifying enough and if the company is worth less than its fair value, then it becomes a potential buying target.

Hence, it becomes difficult to pin down on a particular sector. However, I think the banking and the retail sector have the potential of noteworthy acquisitions.

The prime reason for this is, both the sectors need consolidation and these sectors are definitely coming into the consolidation phase.

What do you think are developments or signs one should keep a tab of?

Every sector has its own dynamics but there are common developments, which, as an investor, one needs to keep a tab of. First, you need to find out in a particular sector how many small and big players are there. If the count of the smaller and fundamentally strong players is more, then there is a likely possibility that the bigger players would try to cash in on the smaller players by acquiring them.

And such acquisitions augur well for sectors, as these players bring in the much-needed efficiency in the sector. We could see more acquisition in the retail sector.

Also, it is important to note that an acquisition entails two important things: hostile takeover and an amicable and mutually consented acquisition.

In my view, a hostile takeover cannot be prevalent in India . One should note that it is not about acquiring a share but acquiring a business. While a mutually consented acquisition works well for both the entities involved. Not to mention credibility of the bigger company, which the smaller entity earns.

Tell us about your new focussed equity fund, considering the current market scenario?

Our fund focusses on the top 200 companies by market capitalisation and our portfolio would include only 20 companies from the universe of 200 companies.

These companies from the market capitalisation itself, signals their ability to be on the top because of the management skills and ability to execute projects and deliver value for the shareholders over a long-term period.