Inbound deals hit; outbound activity to lift: Thornton

A report from data compiler Grant Thornton shows that the Indian mergers and acquisitions (M&A) market showed moderate levels of deal activity in the first nine months of CY13. Raja Lahiri, partner at transaction advisory services at Grant Thornton says that inbound transactions have taken the worst hit owing to the overall economic slowdown. He expects outbound activity to pick up with more liquidity in the system.

However, a few sectors are showing some traction. Lahiri is positive on pharmaceuticals, healthcare, e-commerce, information technology (IT) and financial services.  With the current stability in the rupee, certainty in deals has come back, he says. “However, we need to see this stability for some more time, which would help investor sentiment”, he tells CNBC-TV18. Also read: India's trade deficit dips to $6.76bn in Sept Below is the edited transcript of his interview to CNBC-TV18. Q: The year 2013 has not been good for deals. How are you seeing the road ahead? Are we going to see a pick up in deal activity? A: The year has obviously been a moderate year; nothing new given the overall sentiments. The road ahead doesn’t look to be so smooth. We are still in a juncture where we need to see much more inbound transactions happening. We have clearly seen a huge knock on the inbound deals. I would definitely hope and pray that it moves up the momentum and some of the government reforms etc are important milestones to achieve. More importantly, the overall economic slowdown has impacted the inbound activity as well. So, clearly there are some bottlenecks. Q: Can you give us an idea that which are some of the sectors that are seeing more traction? Which are the sectors are more exciting? A: Clearly there are two, three key fundamental sectors in it. Pharma, healthcare remains a pretty important sector for the Indian economy. Second, we have seen lot of deals in the e-commerce sector. Flipkart just announced a pretty large fund raise sometime back. IT; we are expecting some activity in that sector too. The fourth sector is financial services. Insurance should see some good action going forward. Q: With the rupee now stabilizing at levels around 62, a lot of deals have been stuck because of currency volatility. Do you think it is going to help deal activity and even exits for that matter? A: The rupee stabilizing is a very important event. One month back when the rupee was very volatile there was indeed a fair amount of uncertainty, nervousness about deals, private equity, M&A pretty much all over the place. With the rupee kind of pulling back, I see it is a much more certain environment. However, we need to see this stability for some more period which would help investor sentiment. Q: Are you expecting a pickup in outbound deals? A: If you look at bound, there have been quite some large deals struck this year. Apollo-Coopers more than USD 2 billion is a very large outbound deal. There are some issues on the deal that the parties are facing. The ONGC investment of USD 2 billion outside India in Mozambique. So, the outbound story continues, I think that has been quite strong and I expect outbound to gain momentum with some more liquidity coming into the system.