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Last Updated : Jul 18, 2016 07:46 PM IST | Source: CNBC-TV18

Big-ticket deals to see a spurt on strong macros: Grant Thornton

With a few large transactions in the pipeline and macro-economic factors looking stable, transaction volumes are likely to grow, says Prashant Mehra, Partner at Grant Thornton.

Grant Thornton has released its deal tracker report for activity in the first half of 2016. It has mostly been a resilient period with transactions over USD 21.8 billion across 750 deals.

Speaking to CNBC-TV18, Prashant Mehra, Partner at Grant Thornton, said a major part of the growth has been driven by domestic deals and outbound transactions.

With a few large transactions in the pipeline and macro-economic factors looking stable, transaction volumes are likely to grow, he said.

Furthermore, economy is here to stay and owing to this sustainability, big-ticket transactions are soon to happen, Mehra added.

He is of the view that in the start-up space, innovative business models will get continuous investments going forward.

Below is the verbatim transcript of Prashant Mehra’s interview to Areeb Sherwani on CNBC-TV18.

Q: From my perusal of the report, it seems that domestic deals have mostly driven activity up. What sense are you getting from this? Are foreign investors shying away due to weak sentiment or are there other factors that play here?

A: The overall deal activity at about USD 22-23 billion is a notch above what we saw in the same period last year. Considering that last year we were still riding on the optimism created by the new government and this year it kind of died out, the numbers are very impressive keeping that in view.

As you rightly said, large part of the growth which is substantial USD 15.7 billion or so has been driven by domestic M&A as well as outbound transactions. Domestic M&A, clearly the economy was waiting for quite some time in terms of looking at some consolidations and we are finally seeing those shades of consolidation come into view which is why we see substantial growth in domestic M&A. So, it was just waiting to happen and I think the flurry is already started.

The other bit which has lead to the growth is the interest in outbound transactions. The global economy is obviously not at a very good standing. There is riding growth factor in the Indian economy so there is a lot of outbound interest which is why some of these transactions are happening. Inbound is still resilient but we hope to see some action there as well in the next couple of months.

Q: So essentially the large deals seems to have made up for a lack of volumes going by the reports. Is the drop in volumes are concerned, do you see it as a concern going forward, at least in this time the large deals kind of made up for the low volumes, but that will not happen going forward perhaps might not happen every quarter. Do you see this as a concern going forward?

A: No, not really, I don’t see that as a concern from what I have been reading and following I think there are still a very few large transactions which under pipeline at various stages, so the next quarter or two will seem them unfold. Large transaction is actually a good thing, we were waiting for that to happen, now with the macroeconomic factors all being sustainable. I think there is now increasing confidence that the economy is here to stay if not grow which is why we seeing some of this large transactions, volumes is definitely not a concern and going forward we would see certain sustainability in terms of this large big ticket transactions.

Q: What is your view on the startup space, what kind of sense are you getting now? To quote one of your colleagues in your report Kinari Gandhi, she has written there is ambiguity around the benefits proposed under the startup India initiative launched by the government in January 2016. The volumes in the space in the first half of 2016 have only increased driven by the angel and seed rounds of funding. So, the initiatives of schemes launched by the government per se have not really boosted the sector, it is just individual seed investors that have the startup sector actually going. In fact according to your report I can tell that the startup space has been doing well. What is your indication, are these schemes working or will they just have to pull through on their own?

A: It is a little unfair to start judging these reforms and schemes with the fact that we are sitting at the fifth month after these schemes have been launched. They were launched sometime in the December-January so I think we would need to give them a couple of quarters before we actually see the results of that. However, as far as the startup activity is concerned, I would put it into two categories, one which is pure startup space, angel investments as you rightly mentioned, there we are continuing to see interest.

The other is a more matured startup and from a going forward perspective, though these companies have historically raised good amount of money but going forward any startup which has a sustainable business model, has a innovative business model and a strong one would see continuing investments and probably higher rounds of investment as well.

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First Published on Jul 18, 2016 06:15 pm
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