Mumbai, Feb 25: Mergers and acquisitions (M&A) appears to be the new `mantra' in the Indian financial sector. While corporates are on the prowl, investment bankers are excited about new business opportunities knocking at the door. Overnight, the focus in investment banking has shifted to advisory services in mergers and acquisitions.SBI Capital Markets, a subsidiary of the State Bank, and ICICI Securities & Finance Company, the investment banking arm of JP Morgan and ICICI, are upbeat on making substantial business on advisory services in M&A while the equity market is still in doldrums.
Not to be left behind, the investment banking wings of foreign banks operating in India are strengthening their advisory services desk to aggressively pursue new business opportunities.
"Income from capital market operations will go down as there is no new equity issue. However, the slump in equity market-related business will be compensated by activities in the M&A segment. We are getting a lot of queries onprospective mergers and acquisitions," said I-Sec managing director Kishore Chaukar.
"There will be a lot of business in the M&A segment. While capital market activities are down, SBI Caps is all set to pick up substantial business in mergers and acquisitions," said SBI managing director and group head of associate banks and subsidiaries SN Sawaikar.
Industry analysts said a host of multinationals are on the lookout for possible takeovers. "We expect a lot of activies in drugs and chemicals, cement and food industries," a senior analyst with a brokerage said. "We are carrying out due diligence of at least two cement companies and one prominent player in drugs and pharmaceuticals," a senior executive of a foreign bank said.
According to sources, investment bankers are going the whole hog to grab a slice of the emerging business opportunities in mergers and acquisitions. "There have been a lot of proposals. We are studying some of them. In the next two years we will see that things are actually happeningin the M&A segment," I-Sec MD Chaukar said.
Confirming the trend, an SBI Caps executive said: "The income from advisory services will definitely go up while equity business is on the wane as there is virtually no new issue. Hence there is no question of issue managment or underwriting activities."
The slump in the equity market will, however, partially be compensated by the activities in the debt market. "The major thurst area this year is the private placement of debt instruments," said another industry source.
INSIGHT -- M&As to the rescue
M&A activity is not just a lucrative source of income -- it is in the interests of banks and financial institutions to encourage M&As as a means of corporate restructuring.
That is because several companies to which they have exposures may not, in their present form, survive the chill winds of globalisation. If banks and institutions want to avoid going down with these companies under a mountain of bad debts, funding M&As is clearly imperative.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
