Cos resort to distress sales of non-core assets

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DLF is also struggling under a massive debt burden of around Rs 21,200 crore and has sealed several deals recently in its attempt to trims its debt. (Reuters) DLF is also struggling under a massive debt burden of around Rs 21,200 crore and has sealed several deals recently in its attempt to trims its debt. (Reuters)
SummaryWhile 2012 saw 374 deals, higher than 357 in 2011, value of deals fell to $13 bn from $33 bn.

debt burden such as Diageo-USL deal, Aditya Birla-Pantaloon deal.”

The Future Group sold its Pantaloon retail format to Aditya Birla Nuvo for $160 million months before foreign direct investment in multi-brand retail was allowed. After the Pantaloon deal, the group also sold its financial services company Future Capital Holdings to private equity firm Warburg Pincus for $84 million.

Garnering interest amongst global buyers also remains a concern. “Though a declining Indian rupee would have ideally resulted in cheaper Indian targets for foreign acquirers, moderation of Indian growth rates and policy uncertainties have kept interest from foreign buyers at bay,” said the Grant Thornton report.

“Global buyers are very wary of purchasing assets in India right now given the political uncertainty,” said a London-based investment consultant. “Although assets of distressed promoters may be available at a good value, there is a continuous risk of how government policies will pan out and whether these assets will turn out to be cash burners for the buyer.”

Interest from buyers may revive during the calendar 2013 due to a resurgence in the stock markets.

“Generally it is seen that buoyant stock markets tend to stimulate M&A activity,” said Vinod Wadhwani, director at Ambit Corporate Finance. “Higher market capitalisation of their flagship businesses does encourage CEOs and promoters to initiate M&A activity and this also sometimes results in some wrong decisions.”

“As far as non-core assets M&A activity is concerned, they will continue to happen as the sellers of non-core assets who are strapped for cash will take the decision to sell irrespective of the state of the equity markets,” Wadhwani added.

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