E-comm cos to see pain; tech & pharma to do well: Grant Thornton

Speaking to CNBC-TV18 Raja Lahiri, Partner of Grant Thornton was positive that sectors like infrastructure and cement will see a lot of deal activity. "These sectors will see a lot of consolidation. Companies that are cash-starved will look to exit."Tech and pharma space will be acquisitive in nature, he said.Talking of banks, he said the they will be careful while making big-ticket acquisitions as they are weighed down by bad loans and other regulatory issues.E-commerce companies received huge funding last year, but this year there has been a slowdown which is here to stay for some time, he added.The venture capitalists who are investing in e-commerce companies will be looking at not just funding them but also at profitability. "This is a sector that will continue to evolve."Below is the verbatim transcript of Raja Lahiri’s interview with CNBC-TV18\\'s Kritika Saxena.Q: My first question to you, M&A is strong still but there is a significant decline that we are seeing in cash flows, what is the reason for that?A: It is very clear that there is stress in the economy. Obviously the banking sector is going through that. Cash is king, that is the clear motto that is coming up and clearly you will see distressed assets getting sold and obviously companies with strong balance sheets of course acquiring but the key is cash and second is quality of assets. That is going to really drive deal making from the M&A perspective.Q: But there is still some amount of cash crunch that you are seeing in some sectors. So, what would these sectors be, would it be the regular suspects like cement, infrastructure, power?A: Absolutely, that is the key one. You have already seen Jaypee Cements getting sold to Ultratech Cement on the cement side. There is obviously lots of transactions being talked about some of the infra, cement sectors. You have also seen on the steel side JSW acquiring Jindal Steel. So, clearly these sectors will see consolidation. Companies which are cash starved will be stressed on the balance sheet, will clearly look to exit and that is going to be the trend in some of these sectors.Q: So, if you remove the JSW, Jaypee deal if you remove the heavy consolidation deals is the overall M&A scenario looking slightly tepid?A: It depends on sectors. You also saw Wipro buying a USD 400 million assets in the healthcare side of the US. So, clearly sectors like tech, pharma etc are actually very bullish. You already see Dr. Reddy\\'s buying out assets in the US. Sun Pharma always being acquisitive. So, sectors like tech and pharma will continue to be acquisitive. Depends on the sectors I would say.Q: By when do you think we will see some kind of pickup when you look at the consolidation in the banking space because government has stepped up its effort to look at consolidation and to increase the consolidation but we still haven\\'t seen the private sector open up. There are still deals that are out there but we aren\\'t seeing many deals go through. So, do you expect banking sector to also open up now?A: There is of course possibility of transactions. There is no doubt on that but there are couple of things. One is regulatory and still remains a challenge. Second is the overall non-performing assets (NPA) scenario. So, unless there are specific quality assets banks will also be fairly prudent and conservative to make big market acquisitions.Q: Lastly, private equity has seen a decline in this particular month. What is the reason for that and is that a sign of things to come wherein private equity players have been fairly conservative when it comes to investment but could that be a sign of things to come in the next one year?A: Private equity is a different play. Private equity you saw last year lot of e-commerce company has got huge amount of funding. We have clearly seen that slow down this year. I don\\'t think it is going to suddenly take an uptick quickly. So, the slowdown will continue. However, saying that you also saw Blackstone picking up Mphasis close to more than USD 0.5 billion transaction. So, larger private equity funds buy out transaction is a trend which will continue to take off.E-commerce has already seen a slowdown. It is not going to suddenly pick up in a hurry. However, you also saw companies like Lenskart kind of getting funding etc. So, it is going to be a mixed bag. Saying that I would also like to say there was a huge exit for private equity. Yokohoma kind of KKR exited after Yokohama acquired ATG tyres for USD 800 million etc. So, mixed bag, quality deals will always get funded but overall e-commerce looks quite tepid at the moment.Q: So, would you say that the kind of e-commerce burst, the increase in valuation, the bubble that we were seeing for a very long time in the middle, say anywhere between 6-9 months would you say that that bubble has burst now?A: I really don\\'t want to comment on the bubble or the valuations and stuff like that but fundamentally there is clearly focus on profitability. That is the overall kind of focus and ventures funds will continue to focus on that and just not funding but as a trend I have always said before that this is a sector which will continue to evolve and grow bigger the overall digital space as we move forward.