Deal making may be affected by second wave: Manisha Girotra of Moelis & Co

In a Q&A, the chief executive of the firm says technology, healthcare and insurance sectors will dominate fund raising

Deal making momentum is strong but we need to be mindful of how the second wave of the pandemic affects volatility, says Manisha Girotra, CEO - Moelis & Company India. In an interview to Samie Modak, Girotra says technology, healthcare and insurance sectors will dominate fund raising. Edited excerpts:

Equity capital market activity is off to a good start this year. Do you expect the momentum to continue?

Indian markets have shown strong resilience in the past 18 months. The fundamentals of the country are strong, GDP growth has come back nicely, services and manufacturing are both doing well and the strong banks have capitalised their balance sheets well to weather any storms. Globally investors are seeing India as a good counter to China and foreign capital is coming through capital markets and in private transactions. I see these trends continuing.

Do you expect the ongoing volatility to impact deal making?

The strengthening of the dollar and rising US bond yields could result in capital returning to the US from emerging markets. Deal making may be affected by the second wave of COVID which has impacted our country, its people and healthcare system severely. India needs to move forward very quickly with its vaccination programme in the near term and, in the medium term, we need to strengthen our healthcare systems. We as an economy cannot afford repeat lockdowns. We have to demonstrate that we know how to contain the virus.

The March quarter saw record number of IPOs. You expect more companies to come to the public market?

Yes. I expect the trend to continue. A number of Indian companies have reached critical mass, have built strong disclosure norms given the presence of global private equity firms as equity partners and are showing strong growth projections. Public markets are offering compelling valuations and hence this trend will continue although we need to be mindful of how the second wave of the pandemic affects volatility.

Is there demand for new shares of companies beyond the top 200?

There is demand depending on the sector and also quality of management teams and governance structures. E-commerce, health technology, education technology, financial technology, clean energy, agro chemicals and pharma companies are attracting a lot of capital. Covid has accelerated the rollout of tech in every sphere of life especially in a country as widespread and inaccessible as ours. All the companies that play into this sector are attracting record capital flows.

Which sectors or themes will dominate fund raising?

The tech sector for the reasons we discussed. Healthcare, pharma and insurance as government and people invest more in the health of our citizens. Also, the consumer sector as it plays into the favourable demographics of the strong urban middle class population and the resilient rural economy.

How has Covid-19 altered capital raising activity?

Covid-19 has resulted in the consolidation theme playing across sectors with the large players becoming well capitalised. A lot of capital in the public markets is flowing to large, more liquid companies and hence these companies are commanding premium valuations. Also, the sector theme is playing out with pharma, IT services, tech, and consumer taking the lion share of capital flows.

What is your take on SPACs? Will it take off in India? Or is it a good option for Indian companies to list or raise capital from abroad?

SPACs provide another capital raising alternative to Indian companies. Companies will continue to evaluate various alternate routes to access capital. I am sure many will find the SPAC as a quicker, accelerated way of becoming a public company.

Does it make sense for Indian tech or e-commerce firms to list domestically or in the US?

It depends on the size of the company. Mid-sized companies should continue to list in India as they will get lost in the large US markets which are not their natural home country. The large companies can and will consider US markets as an alternative. However, the Indian markets are now strong and deep enough to absorb large issues too.