Overseas acquisitions by Indian companies will be the driving force of M&A transactions in the country, according to panellists at the opening session of VCCircle M&A Summit held at Four Seasons Hotel in Mumbai on Wednesday.
Outbound deals have been rather subdued with only 108 deals worth $3.34 billion for the first 10 months of the year. While India may be able to trump last year's target, the country is still way below its previous peak of $29 billion in 2010 and is even behind the average of $8 billion during 2011-13.
"China is in turmoil and Europe has a refugee problem; so the global scene may not be that great, but India is isolated. This is an opportunity for Indian companies favouring lower valuations,” said Vijay Paradkar, vice president, M&A, Mahindra & Mahindra Ltd.
The panellists said the global conditions are favourable for India and pointed to fiscal policy being supportive of outbound transactions.
"The devaluation of rupee has been one of the big challenges for us but fiscal policy has given leeway for taking debt for foraying into different geographies," said Mudit Saxena, COO, HealthCare Global Enterprises Ltd.
Though panellists said the government is still embroiled in tax issues, they opined that clarity on MAT and introduction of GST will help the government's case further.
"While third quarter figures showed a 38 per cent decline in transactions, the figures are expected to be far better for coming quarters in terms of how deals are structured," said Vivek Sehgal, head, M&A Sales at Intralinks India.
The opening panel was moderated by Vikram Nirula, partner at India Value Fund Advisors Pvt Ltd. The panel witnessed active participation from Rajiv Saxena, head - mergers and acquisitions at Essar Group; Alpesh Dalal, head - M&A and investor relations at Lupin Ltd; Kumar Shah, head of strategy and M&A at Micromax Informatics Ltd and T N Giridhar, CEO India and managing director at Lincoln International.
According to panellists, investors are attracted towards indigenous product companies. “In the last five years, product companies built in India have been well funded,” said Shah of Micromax Informatics.
The issues dragging M&A activity in India include taxation, regulation and governance. “Taxation has been a big dampener; other important issue has been governance,” said Giridhar of Lincoln International.
According to panellists, synergies between two companies should be thoroughly thought of before they decide to go ahead with an M&A deal. “Integration plays an important role in realising synergies,” said Rajiv Saxena, head - M&A at Essar group.
More than 120 investment bankers and investors attended five sessions led by 25 panellists.