‘Strong interest for right issuers’
Fundraising activity, both in equities and debt, has been pretty robust in recent times. ASIT BHATIA, managing director, India Global Corporate & Investment Banking Group, Bank of America Merrill Lynch, tells Vishal Chhabria that the first quarter was good and he is optimistic about 2017, while sharing his views on the other trends in the market. Excerpts: And therefore, good issuers, who have kept investors updated on what is happening in their company and the industry, who have a good story going forward and who have good corporate governance standards, their paper sells. Investors want to back the right companies. Anything and everything won’t sell, just because there is high liquidity in the system.
Volatility in the markets is another important factor for consideration. Therefore, one has to time the issuances to perfection. There have been several external events over the past few months such as say the US elections, the geopolitical situations around the world, the French election, Brexit, etc, making markets volatile. Consequently, the time window for execution of deals has become much tighter. In the past 12 months, we’ve seen many IPOs from new sectors — diagnostics, life insurance, etc. Any more new segments emerging in the IPO space? Newer sectors will continue to access markets in future; e-commerce is an example. We haven’t really seen issuances in this area. There is obviously some consolidation happening in the e-commerce industry, but still, we will find issuances happening in future. The REITs and InvITs are being filed now and over the next few months, we will see some successful issuances in those sectors too.
Bank of America Merrill Lynch has been at the forefront of bringing new sectors to the market. To name a few: The first private sector bank, airline company, telecom company, telecom towers company, the first insurance company etc. That has always been the forte of our franchise. The government has also lined up many offers through divestment and IPOs. Can markets absorb all of this huge supply? There is enough liquidity right now for the markets to absorb. For good quality paper, there is liquidity for sure. In fact, the issue sizes are getting larger. The insurance IPO that we did last year was around ~6,000 crore, the largest in the past six years, and it was oversubscribed. Barring a few sectors or deals, not much has happened on the M&As front. In sectors such as roads, power, steel, even as valuations have fairly come down, activity levels are still weak. What’s your take? The roads sector will go through a complete change once InvITs are well accepted in the market. Some of the M&As in cement or power sectors are about distressed assets going to stronger players.
On the cross-border front, I see interest both ways.