 "Consumer growth doesn't go away: Asit Bhatia")
The Jet-Etihad talks were on for a while. Why did it take so long to close the deal?
This kind of transaction always takes time, but we knew it would close. One key challenge was that the stock price of Jet did not reflect its fundamental value. A key focus was to get buyers to recognise the strategic value in the airline.
What impact will this deal have on the aviation sector?
I think this sets a benchmark for the industry. It opens the possibility of other foreign airlines picking stakes in local airlines. We are involved in some other discussions as well. You always need one to open the floodgates.
The valuation was high. But in aviation, we are not seeing that much growth and potential...
Earlier, we just had Air India and Indian Airlines. After that, we saw private airlines come in. If you look at quarter-on-quarter, or last year versus this year, you will see it grew only at two, three or five per cent. That is not the right way to look at the industry. Look at the long-term growth story over the past 10 years or since the sector was opened in the 1990s. The industry has grown manifold and the growth prospects remain one of the strongest globally.
So, what do such inbound deals mean?
Foreign airlines get the efficiency, logistics and global connectivity. It becomes more and more affordable. With AirAsia coming in, look at what they are planning to do – they will open a completely new sector and you will see traffic grow. So investors and acquirers see that potential and that story is not going away.
It is the same with consumers, where we are involved in the Diageo-United Spirits deal. I continue to always remain bullish because of our strong middle class. I know it has been said for the past 10 years but I strongly believe that the sector will grow and continue to make India thrive. You will see these ups and downs but the consumer growth doesn’t go away.
The largest deals -- Diageo -USL and Etihad-Jet -- are taking place because these assets are in a distressed position. Debt-ridden companies are selling off assets. Will the situation continue in 2013?
You are seeing some action where one of the parties to the transaction involved is going through a rough patch in the short term. But that is necessarily not the case with every transaction.
That is certainly not the case for outbound deals where some very strong Indian companies are involved in active discussions. If you look at Diageo-USL, it is beneficial for both companies, with Diageo getting access to such a huge market. The same applies to Jet-Etihad.
Roads and ports assets are kept on the block by infrastructure companies in India. Will there be buyers?
It is to do with government policy decisions. Everyone recognises this will be attractive in the long run, but right now it is a wait-and-watch policy. Nobody is in a tearing hurry to start investing in Indian infrastructure. We have seen the first signs of policy changes and, therefore, activity should pick up, and infrastructure is a major need as far as India is concerned. But generally, there is a lot of talk but little action.
Are infrastructure and power companies facing the heat?
Yes. For instance, GMR sold its Singapore business. Individual companies will look at their options to de-leverage, and if there are assets for which they find buyers, those could go. There are others who are looking to raise money; some are talking to private equity funds. Each one is doing adjustments in a way that best fits their strategy.
In this situation, how can private equity investors play a key role?
Everybody has a role to play. Private equity has a role to play, a strategic investor has a role to play, and markets have a role to play depending on an individual situation. These days, there is moderate activity. People are looking at specific assets. So you are going to find that sector-specific private equity activity will happen.
At present, are Indian companies keen on outbound deals?
Yes, there are several that are looking but you may not see (a repeat of) 2006-07. Those were exceptional times. Indian companies now are being cautious, and rightly so. The world is in a different shape and there is no blank cheque being cut out. All are very focused on valuation, though the ability to raise money for good companies is pretty good.
Would capital market be a major source of revenue this year?
We are more focused on increasing our revenues from investment banking, not so much on which pot it comes from, be it M&A advisory, or equity capital market transactions of debt capital market transactions. The pipeline in all three look very good for us and we are very busy. M&A (mergers and acquisitions) could be very strong in the first half as we did two large deals. Then again, ECM (equity capital market) could be much better in the second half. And DCM (debt capital market) has continued to remain very robust the last eight months, and we have done landmark deals like the Reliance perpetual bond.