Mumbai ,
While global macro challenges have dampened IPO fundraising activity this year, investment banks have seen increasing opportunities in mergers and acquisitions (M&A). In an interview, Kotak Investment Banking Managing Director and Chief Executive Officer S. Ramesh shared his views on the factors driving the growth in M&A, outlook for the IPO market and hiring plans of the bank. Edited excerpt:
What is the outlook for capital market activity?
We have started seeing opening commentary and signs of interest rate hikes are easing a bit Future, and it will be a turning point from the perspective of primary markets, especially the initial public offering. Having said that, large IPOs, which require both foreign and local funds, cannot be launched. This is because foreign funds are still cautious about fresh investments, but medium-sized issues may continue as mutual funds have raised large sums and will be active primary market participants.
Another important perspective is that it remains a buyer’s market, so sellers of equities need to keep in mind that investors are cautious about the world and markets, and they can price it, which could lead to a drop in valuation. .
We’ve seen some great deals this year. Will M&A activity continue to be strong?
M&A volumes continue to grow. We have already seen some big deals in the financial services and cement sectors. Indian M&A is at a turning point, and this year, we expect M&A deals to reach $200 billion and remain at those levels for years on a sustainable basis.
In many businesses and sectors, valuations are justified, forcing buyers to explore inorganic opportunities. Foreign strategic investors have also drawn back because of the growth potential India has to offer. Interested in consumer, technology, manufacturing and financial services. Financial sponsors are sitting on large pools of capital and are eager to buy more and invest.
Renewable energy and new energy may see strong M&A activity as corporates are showing interest in the sector apart from financial sponsors.
How are new-age technology companies dealing with funding over the winter? Do you see large M&A opportunities in this area, especially for structured products?
Funding for new-age technology companies is going through an influx. They are facing questions like: Will the IPO happen? Will there be funding? I don’t think IPOs will happen in a hurry. It will take some time for that cycle to come back. The theme of growth that we saw 2-3 years back is now moving towards growth and profitability. People are focusing on unit economics. People want to see how the business model will survive the setbacks. I see M&A as an important topic for this group of companies.
For the foreseeable future, consumer technology may take a back seat, paving the way for B2B disciplines and emerging areas such as sustainability and green technology.
We see that revolution on a global scale, and it will have its own branches in the provision of capital. Consumer tech firms may be tempted to raise capital for some more time. We are seeing interest from investors for structured capital as compared to plain vanilla equities.
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