Following market volatility and the recent global turmoil, 2016 began on a subdued note for merger and acquisitions (M&A) in the country, says a report filed by Grant Thornton.
The value of deals struck in January this year fell to USD 3 billion, compared to USD 4.5 billion in the same month last year.
In an interview with CNBC-TV18, Prashant Mehra, Partner at Grant Thornton said that e-commerce has been the biggest contributor, as it clocked around 20 percent of the deal value for the M&A sector for the month of January.
Below is the transcript of Prashant Mehra's interview with CNBC-TV18's Nayantara Rai.
Q: In this report that you have written, you talk about how 2016 has begun on such a subdued note with total deals of around USD 3 billion as compared to USD 4.5 billion in January 2015. What I want to begin by asking you is that why do you think it was subdued, let us not forget that January also coincided with global carnage of the equity markets, you have seen a lot of volatility in the currency markets. So, do you think it has been subdued because a lot of deals are getting reworked or do you think this is being driven by bad sentiment?
A: I think it is a bit of both. You are correct that the year started on a very subdued note with just USD 3 billion clocking it up as compared to USD 4.5 billion last year. However if we do that comparison it has really been because of the two big ticket transactions same time last year which was Suzlon and Harman Symphony transaction which itself was about USD 2 billion or so collectively. So, if we take that out we haven’t really started as bad as it seems so.
However it is also true that whatever has closed in January is result of the work which went around in December and half of December is a holiday period. Also with the Asian markets playing games a lot of deals have gone back on the burner or the drawing table.
With whatever recently happened I think the effect of that we will probably see sometime in December which again will be a very laid back month because there will be a lot of optimism riding on the Budget. So, deals could be on the backburner.
Next month again is March which is the financial results coming out. So, don\\'t really see the quarter rolling out in a very exciting manner but after that there is a lot of optimism there.
Q: Despite you giving such a subdued outlook for the next 2-3 months which are the sectors that continue to buzz or which are the new buzzing sectors?
A: If you look at the activity in January, the clear leader is again like the past couple of quarters has been e-commerce which contributed about 20 percent of the deal values for the M&A sector and close to 50 percent of the deal values for the private equity sector.
So, the investor confidence will be on the IT, ITeS, e-commerce sector. Other than that we have seen telecom clock some significant value as well along with pharma and healthcare which has again been a trending sector. Surprisingly a new sector has come up this time and I am hoping this is not because of just a one off thing and will be a continuing trending sector which is hospitality and leisure and which is probably the first sector which gets impacted when we see a lot of foreign investment coming in because there is this Make in India initiative and India is drawing a lot of business crowd. So, investment in hospitality and leisure is nothing which comes as a surprise.