Indian mkt needs hostile takeovers: Grant Thornton

“I see private equity continuing to invest capital into India Inc. We hope that there would be some hostile takeovers because that is something Indian market badly needs to ensure good value creation for the shareholders,” he adds.

Below is the edited transcript of Harish’s interview to CNBC-TV18.Q: What is the headline that has emerged then?

A: It has been little subdued this year. However, the basic level of activity for the last three years seems to be stablised at around a 1000 transactions. We haven’t seen any significant uptick or downtick in terms of numbers of deals.

However, values have dropped significantly potentially reflecting the current economic environment. The big takeaway for this year would be the significant jump in private equity deals which could be surprising for a lot of people given the negative investment horizon, the dip in the rupee and the difficulties private equity have in exiting. They have, however, jumped from about USD 7 billion to almost USD 10 billion over last year.

The average deal size has also gone up looking at interesting transactions including a lot of buy outs. So, that to me is the big headline. The other headline is continued interest in outbound by India Inc. Average deal size is gone up though number of deals in the value has fallen.

Q: You said the average deal size has gone up so what are the key deals that stood out in 2013 and of course some sectors of interest?

A: The key deals are global majors investing into India. We recently read about GlaxoSmithKline (GSK) increasing its stake, Hindustan Unilever (HUL) putting in money and of course Diageo. There have been various others like Oil and Natural Gas Corporation (ONGC), Cipla and lots of cross border deals.

However, we used to see in excess of a dozen USD 1 billion deals in the past but now it is down to about three or four. So, these are some of the big deals. In the private equity, the Barings investment of USD 400 million is probably a deal that stands out in Zensar.

Q: Going in to 2014 what is the outlook for Deal Street?

A: We remain hopeful and hopefully, we will see some growth in the economy and that should bring in a lot more focus on deals. If the business environment improves in India I might see a reduction in outbound deals and an increase in inbound deals.

I see private equity continuing to invest capital into India Inc. We hope that there would be some hostile takeovers because that is something Indian market badly needs to ensure good value creation for the shareholders.