'Global assets are selectively available at attractive prices'

Q&A: Sanjay Sakhuja, CEO, Ambit Corporate Finance

Ambit Corporate Finance has not been much in the news after the Sesa Goa-Dempo deal, but CEO, is not worried. He says there are several merger and acquisition deals in the pipeline and the coming months would see his firm featuring more prominently in the Initial Public Offering (IPO) arena. Also, he tells Ashish Rukhaiyar and Abhineet Kumar, the company has decided against getting into the stressed asset business. Edited excerpts:

There has been action in the market but Ambit, it seems, has remained silent after the Sesa Goa-Dempo deal of 2009. What kept you out?
Deals get stuck for various reasons. Sometimes it is valuation, sometimes it is the intent of the buyer or the seller.

Also, what tends to happen is that each house has its client relationships and industry expertise in niches. While the first quarter of this year has seen some big volumes, they have all been in the telecom space. That is not Ambit's speciality; we are not large players in telecom. But, we have some very interesting deals at a very advanced stage of negotiations and we expect things to materialise over the next several weeks.

Which are the sectors where Ambit has a strong foothold?
Our strength is banking and financial services, media, logistics. We do some FMCG (fast moving consumer goods), pharma and IT (information technology) also. We have been increasingly looking at chemicals and aviation. These are our areas of expertise. We have several deals in the pipeline in these sectors.

The recent past saw some significant outbound deals. Is it safe to say these are back?
We can expect outbound deals to happen for a number of reasons. The market movement is more stable and so, people are more confident about taking long-term decisions. A lot of Indian corporates have both raised capital to leverage their balance sheet and are sitting on cash. But, more important, due to the run up in the stock markets, they have the ability to issue more capital and therefore have the currency for acquisition. And, the debt markets have become very benign again.

So, acquisition financing is once again available. So, all the enabling factors for Indian corporates to look overseas are back in place. At the same time, the global market seems to be in a state of flux and so, global assets are selectively available at attractive prices.

Would domestic consolidation take a back seat as the market stablises? As in, would corporates do more of looking overseas?
By and large, Indian businesses are on a high-growth trajectory. So, you will find more buyers than sellers. For somebody to agree to sell or want to sell, he has to get a super-attractive price.

Indian buyers do not tend to pay a 'too-high' price for acquisition. So, if somebody is looking at a cross-border entry strategy into India, he is willing to pay a more attractive price than an Indian buyer who has already got the distribution reach and the business flow.

Ambit has been completely absent in the IPO space. The last one was Cinemax in 2007. What made you sit out, even though the recent past saw a lot of fresh paper pouring in?
Historically, we haven't done much on the capital market (IPO) side. But, in the next 12 months, we expect to be back in business. We have been building our distribution capabilities. We hired a team from Merrill Lynch a year ago. We have been building our institutional equity team and have put a sales team in place. Over the next 12 months, you will see our name in a few IPOs and QIPs. We will focus on issues in the range of Rs 100 crore to Rs 400 crore.

In 2008, Ambit was planning to get into asset reconstruction. Any development?
We spent a lot of time examining it but then decided against it. So, at this stage, it is not part of our thinking. We were very seriously looking at it. We were looking at both asset reconstruction and debt restructuring. Also, what happened was that the last cycle was a very short distress cycle.

The economy moved quite sharply and it made no point looking at stressed assets. In the past 6-9 months, people have raised so much capital and de-leveraged their balance sheet and the stress is not there anymore. So, we decided against it.

Ambit has no presence in the retail segment. Any plans?
The only element where we will be in retail will be in a possible asset management business. So, we may get into a JV for asset management. There is a discussion at an advanced stage for launching (a mutual fund business).