Japanese companies are trying to diversify to other markets and India ranks very high on their priority list, says Ajay Saraf, ED & head of corporate finance and institutional equities, ICICI Securities. He tells Ankit Doshi of FE that elections are crucial and with a stable government, Indian capital markets could see a flurry of IPOs.
What is the near-term outlook on Indian equities?
I think everyone is waiting for the election. On the disinvestment front, things are moving ahead with HZL, Balco and CIL announcing special dividends. The government is cutting down on expenditure and, so, deficit should be under control. As the government doesn?t feel the need to borrow more, one can see yields coming down. Hence, the situation is better than it was six months ago.
Are you surprised to see so many policy announcements in the last 3-4 weeks?
No, it was more or less expected. After February, as election guidelines come into force, the government may not be able to take policy actions. Inflation seems to be under control. Hopefully, equity markets and, especially the IPO markets, will look up. We will see a few mid-sized IPOs, say Rs 500-1,000-crore offerings, happening in this quarter.
In the past three years, we have seen several IPO cancellations? Are things different this year?
The large IPOs will depend on election results. If a stable government comes to power, I believe, there will be a flurry of activity in the IPO market. So, elections will play a big role. Until then, you will see a few mid-sized deals.
You recently tied up with Japanese investment bank GCA Savvian. The reason?
Japanese corporates are trying to diversify to other markets. India ranks very high on their radar. After a long time, the Japanese emperor and the PM travelled to India and this indicates India is an important market for them. So, we may see a lot of interest in the Indo-Japanese corridor. GCA Savvian was looking for an Indian partner with strong distribution reach. We were also looking for a Japanese tie-up because we anticipated a lot of interest in the Indo-Japanese corridor.
About 40-45 Indo-Japanese deals took place in FY13, with $2-2.5 billion flowing into India. What growth do you expect in the next 2-3 years?
The amount of money coming into India will see a jump over next 2-3 years. The number of deals may even treble over the next 2-3 years across sectors like consumer, pharmaceuticals, services, industrials,engineering and automobiles.
Any deals in the Indo-Japanese corridor that I-Sec is working on at present?
We are working on a few deals. However, these have a gestation period of about 12 months. Typically, the Japanese take time to evaluate and decide on a deal. However, once they have decided, they are true partners for the long run.
How are investment banking firms doing in India?
A lot of mid-sized transactions are under way ? more in the M&A and private equity advisory space. I-banks that are positioned to take advantage of such mid-sized deals ? say of $35-150 million ? in IT, healthcare, FMCG and financials will do well. Some other sectors attracting interest are roads, infrastructure and industrials.
Going back to IPOs and disinvestment, any chance of PSUs like Hindustan Aeronautics and RINL hitting the market?
It looks less likely after the government announced its decision to go ahead with Hindustan Zinc and Balco stake sales. I don?t see any further disinvestment issues happening because the government was banking on CIL, IndianOil and HZL. After these, the government will be very close to its target.