The merger and acquisitions (M&A) announced in 2016 saw a fairly large chunk in renewable energy, it is a space that is attracting interest both from strategic and private equity and will be quite conducive, says S Ramesh, MD and CEO, Kotak Investment Banking. Speaking to CNBC-TV18, Ramesh said that a few top companies from the renewables space are likely to get listed and will receive a good response from the market. Further, he said that M&A deals worth USD 65 billion were announced in last calendar year, of which USD 13 billion was from private equity investment and the balance USD 52 billion was from M&A demerger and other traditional ways.
Below is the verbatim transcript of S Ramesh’s interview to Prashant Nair and Ekta Batra on CNBC-TV18.
Ekta: We were talking about the possible deal in the renewable energy space where RePower might or Sumant Sinha’s firm might be selling 10 percent for a valuation of around USD 2 billion to a Japanese company. Wanted your thoughts in terms of the potential that we are seeing in the renewable energy space and whether we are possibly going to see any further deals and that might be the hot space to watch out for in 2017?
A: If you look at the merger and acquisition (M&A) deals announced in 2016, you did see a fairly large, substantial deal in renewable energy. It is a space that is now attracting interest both from strategic private equity and will be quite conducive to listing. So watch out for this space. The top one-two companies from this space hopefully will get listed and receive a good response from the markets.
Prashant: Over the next three months or so could you talk to us a little bit about the deals that you are working on, the overall quantum of deals, what are we looking at, could you help us out with some numbers because we have spoken with others on the investment banking side and we have been told that 2017 will be a much bigger year as compared to 2016 and 2016 wasn’t bad either?
A: You are right. 2016 was a good year for the industry. I will just put some statistics and then let us look at what can be the outlook for 2017. So overall M&A and advisory close to USD 65 billion of deal has got announced during calendar year 2016. Out of that USD 13 billion was from private equity investment and the balance 52 was classical M&A and demerger and other stuff. If you look at the initial public offering (IPO) space, Rs 26,000 crore which is roughly USD 4.5 billion over 26 issues came. So if you add these two, it has been a record year for the industry.
If I look at 2017 crystal ball gazing from the pipeline and what activity we are hearing from our competitors, the M&A advisory piece is likely to be quite vibrant and active. The themes broadly remain the same around overleveraging, consolidation of players within industry. Some sectors will have to consolidate given the environment around which it is operating. If you look at the digital space, we are now seeing more wish list for players to come together. So some of these themes are expected to pay out. On the capital market side, it is very heartening to see and we are reading about it, we may see some very interesting companies like the insurance companies from the state of the government stable coming, some of them are large, great companies will receive a good response.
So I think the exchanges will continue to list. These have always been darlings of the market. So I see a pretty good environment overall both on advisory and capital markets for 2017. I am not able to put a number but I won’t be surprised if they exceed what we achieved last year. Ekta: Anything else beyond that in terms of an IPO pipeline that we might see most interest from in 2017? A: We will continue to see interest from the broader healthcare pharma and financial services. Financial services had a pretty large dominance in 2016. We think that trend will continue in 2017. So some of these trends will play out. I just want to add one line to the profile of the companies. Most cases, the profile of the companies are companies with very good return on equity, good track record and have good steam of growth left for the future. That is the profile of companies that institutional investors and retail investors has started liking about Indian IPOs.