Indian companies, which have so far confined to proprietary transactions in mergers and acquisition (M&A), would start coming to the auction space in the next few years, according to Gaurav Khungar, managing director, head-corporate finance of Religare Capital Markets Limited.
The market would be created around valuations once the auction process takes off, he said at a conference held by Dun & Bradstreet (D&B) under CFO series 2012 here on Tuesday. As the M&A market in the country has evolved only in the past ten years or so, the companies are not equipped to handle auction process in this space, he said.
The M&A activity last year was subdued with 18 per cent decline in inbound activity and 50 per cent decline in outbound transactions. One reason for the decrease in acquisitions was because the premiums on the valuation front were very steep, he said citing a few examples in the pharma sector.
Price expectations have become an impediment in the pharma acquisition space though M&A activity is bound to happen in this sector, according to Susanto Banerjee, executive director & head-finance of Mylan Laboratories Limited. But when this process would be revived and what would be the trigger were not clear as of now, he said.
No major acquisition in the pharma sector has happened in India in recent times because the valuations of companies have moved from multiples of Ebitda (earnings before interest, taxes, depreciation and amortisation) to the multiples of sales, said K Ganesh, vice president, corporate finance of Dr Reddy’s Laboratories Limited.
Dr Reddy’s had done 10 deals between 2006 and 2011 and all the acquisitions were restricted to the core business of generic formulations. The company currently sees opportunities in delivery systems as it has started getting into injectables, according to him.
According to R Bandyopadhyay, former secretary of Ministry of Corporate Affairs, there could be over 25 per cent increase in the M&A activity in the current calendar year.