Most M&A deals will be seen in infrastructure, engineering, pharma, agro-chemicals and water solutions sectors
While global economic scenario remains uncertain and Indian markets show volatility, Gujarat is expected to witness mergers & acquisitions deals crossing about $50 million (approx. Rs 2700 crore) during the year 2013-14.
According to industry insiders, most M&A deals will be seen in infrastructure, engineering, pharma and agro-chemicals and water solutions sectors. "Many deals are currently in the pipeline. Engineering, pharma are seeing consolidation happening. There is lot of interest of investors for investment in these sectors," informed Savan Godiawala, Senior Director, Deloitte Touche Tohmatsu India. Industry players have expressed hope of strengthening Indian economy and increased fund flow from overseas investors.
According to industry estimate, at least $50 million worth of investment in Gujarat is likely to be made or announced during 2013-14.
The international crude oil prices have fallen to around $86.22 a barrel on the New York Mercantile Exchange (NYMEX) for May contract. Indian crude prices fell to Rs 4,813 per barrel on Multi Commodity Exchange (MCX) for May contract. "Fall in crude oil prices will reduce inflation risk for a country like India. And there are increased chances of the apex bank, Reserve Bank of India cutting key rates, thereby allowing banks to cut interest rates," said an analyst with a broking house.
Indian rupee too has showed signs of improvement on Tuesday to touch a one month high level of 54.14 against a dollar on robust FII inflows and hopes of lower current account deficit due to falling oil prices.
"Next couple of quarters is needed to be monitored closely. The GDP numbers need to be stabilize. Sectors such as auto components are not seeing growth at this moment. However, pharma industry is doing fairly well," said Ashesh Shah, managing director, Trans-Continental Capital Advisors - a Mumbai-based financial advisory firm.
"The financial situation is stressed and liquidity condition is tight for the internal acquisitions in India," he said.
It may be noted that in the infrastructure space, already deals are in pipeline for a 25 per cent stake for LNG terminal project at Mundra. The total project cost is estimated to be around Rs 5000 crore. Also, the World Bank Group's International Finance Corporation (IFC) has been investing in companies in Gujarat and is expected to increase its focus in renewable energy projects in the state.
However, raising a concern, Vadodara-based investment banker and M&A advisor, Sanjeev Shah maintained that upcoming Lok Sabha elections and political development will bear the key to success of M&A acquisitions in the country during the year.
"Reforms, which can boost investment scenario, have not taken place in past years. So, after general elections in 2014, things will be clear. The investment environment will depend more on the political leadership post elections," said Shah, who is a chartered accountant.
According to him, in Gujarat, water solutions sector is also one of the promising sectors where investments through M&A will be seen during coming months.
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