INDIA
approach has meant that the Indian economy has been
greatly sheltered from global recessionary storms,’ says
Shardul Shroff, Managing Partner of Amarchand &
Mangaldas & Suresh A. Shroff & Co. ‘The RBI had prohibited external commercial borrowings in the real
estate sector and not permitted cross border securitiza-tion. Consequently, there was no sub-prime crisis of any
significance in India. The market in derivatives is also
not very substantial and consequently none of the
Indian banks failed.’ None of the banks in India had to
receive state support.
‘The Indian banking sector, unlike its global counter-
parts entered the economic crisis with high capital ade-
quacy and low non-performing loans which has con-
tributed to its accelerated recovery,’ adds Katwala.
TRENDS
The banks may have held up well, but India, like so
many other countries, relied heavily on exporting goods
to the West. ‘Since India is globally connected, the
impact of shrinking of the world trade was felt here as
well and the capital markets practice, the cross border
mergers and acquisitions and external commercial borrowings for Indian entrepreneurs were affected correspondingly affecting the firm’s practice area in those
spheres,’ comments Shroff.
‘As expected, the previously high levels of interest
from private equity investors virtually vanished,’
explains Katwala. ‘There were increased levels of interest in public M&A deals where Corporates who listed
subsidiaries in India to comply with foreign investment
norms wished to increase their stake in their listed subsidiaries as well as consider delisting those subsidiaries.
The second half of 2009 saw a tremendous increase in
equity capital markets transactions in the nature of
IPOs, GDRs and share placements to qualified institutional investors. Increased levels of bond issuances were
also observed. We expect this trend to continue into
2010. We also find Indian companies continuing to
evaluate acquisitions outside India and expect to see
increased levels of outbound M&A going forward,’ he
adds.
FUTURE INVESTMENT
The Indian market is making a quicker recovery than
most other markets – that much is clear. There seems to
be good reason for optimism. ‘We expect the next 12
months to be very busy with capital markets and M&A
(both outbound and inbound) likely to be active areas,’
says Katwala. ‘Part of this will be driven by the need of
non-resident entities stepping up their focus on gaining
a stronger foothold in the India market and partly as
Indian Corporates satisfy their appetite to diversify away
from India.’
India remains a very attractive investment destina-
tion. Its GDP is likely to grow by 7 – 8% in 2009-2010.
The recent Auto Exposition in New Delhi revealed that
the sales of passenger vehicles in the last year had risen
by 21% compared to 2008. It is expected that India will
The second half of 2009 saw a
tremendous increase in equity capital
markets transactions in the nature of
IPOs, GDRs and share placements to
qualified institutional investors.
be a 4 million unit car-market by 2015 (including
exports which could add up to another 1 million units).
The housing sector in India is also booming and there is
a steady demand for low cost housing.
Growth in telecommunications in the GSM sector
has been phenomenal and almost 14-15 million lines
are added every month. ‘M&A activity has been fairly
active in this sector, the latest one being the largest all
cash deal for purchasing a cellular tower undertaking
sold by Aircel (Maxis) at $1.8bn. Bharti Airtel has also
acquired a majority interest in Bangladesh’s Warid
Telecom at $350m. We are, therefore, seeing Indian
investments going out to acquire assets and foreign
investments coming into India for infrastructure activities,’ says Shroff.
There are several opportunities for attracting foreign
investment in India. The Government’s Minister of
Surface Transportation has set a target of adding 20
kilometres of national roads per day in an ambitious
road connectivity plan for enhancing state and national
highways and interlinking roads in India. ‘In addition,
the defence sector has also seen activity for the acquisition of sophisticated armaments on an on-going basis
with almost all international players from the US and
Europe represented in India. This activity has enhanced
the defense sector practice areas of the Firm and
opened new avenues. Evergreen areas like energy and
oil exploration continue to be a hot bed of activity, with
joint venture and cross border investments into India
being an on-going phenomenon,’ concludes Shroff. O
