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: and it stresses on acquiring these entities."

This rule has made bigger banks scout for smaller banks having a presence in smaller towns and villages. Also, greater penetration and healthy advances and deposits work in the favour of smaller banks. A case in point is the acquisition of Sangli Bank by ICICI Bank. Sangli Bank had a major presence in Maharashtra mainly in rural areas, where ICICI Bank wasn't present. ICICI Bank cashed in on the opportunity to acquire Sangli Bank at a very attractive valuation. Also, there are certain medium and smaller banks with no promoters holding and have very healthy advances and deposits and a good branch network. City Union Bank is a case to point out. The bank is continuously expanding its branch network and has a very good net profit margin.

From a consolidation point of view, you could take exposure to capital goods and the infrastructure sector due to their healthy order book and these sectors being the biggest driver of the growing economy. Especially, in case of the capital goods sector, where a smaller company has a specialisation in some product, could be on the radar of bigger capital goods, which wants to enter that segment and sees very high growth irrespective of whether the target company is in losses or not. These dynamics also work for infrastructure, where there are a lot of smaller companies having a presence in a particular city or state. Someone wanting to have a pan-India presence can acquire such type of companies to get a larger market share. However, it may be difficult for any company to acquire due to higher promoter holding. And the difficulty is made more difficult when there is a creation of speculative news about a company.

a) Reading between the developments Orchid Chemicals and Pharmaceuticals, a small pharma company came into the limelight due to a 12.8% stake, reportedly, bought by Solrex pharmaceuticals from the open market. This kind of significant stake-buying takes place only when any entity desires to acquire that company. There may be various reasons for acquisitions; like very attractive valuations, strong products, higher presence, and synergy. However, you must note that if any entity buys more than a 15% stake, subsequently, it has to give an open offer to the shareholders to buy an additional 20% stake.