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The offices are deserted and meeting rooms at the swanky Bandra Kurla Complex here are empty. The investment banking community is witnessing yet another crippling slowdown this year, with very few big deals announced so far and the prospects for the rest of the year not so good.
A global slowdown, political uncertainty at home, controversy over the Vodafone tax case and falling valuation are deterring both buyers and sellers from signing on any transaction. "Where are the deals?" asks an investment banker. "We have a whole team sitting in office and doing nothing. Sooner or later, pink slips will follow."
Though there have been a couple of deals, the number since January is down substantially. "When we go to sell any deal abroad, the first question foreign investors are asking is on the Vodafone tax issue," says Avinash Gupta, head of financial advisory in Deloitte.
The biggest inbound transaction announced till date is Mylan's $1.8-billion acquisition of Agila Specialties Ltd, a unit of Strides Arcolab and a $625 million takeover of Alliance Tire by KKR. Apart from these two, the M&A (mergers and acquisitions) activity is halting. Statistics from Dealogic shows M&A transactions are down to 210 deals worth $3.3 bn in the year to date, from 373 transactions worth $20.7 bn in the same period. (TOP M&A TRANSACTIONS IN INDIA IN 2013 (TILL DATE))
The $5-bn transaction between Videocon and Oil and Natural Gas Corporation & Oil India for the takeover of the former's 10 per cent stake in a Mozambique gas field has still not been made public.
Apart from M&As, the share sale business of the investment bankers are also not showing signs of a pick-up. The result is large teams sitting in offices doing nothing and falling advisory fees. "After some time, everyone starts worrying about the future," a banker says.
Besides, some high-profile exits made the atmosphere sombre. PJ Nayak, chairman of Morgan Stanley, recently decided to quit, even as the company plans to sell its wealth management business to Stanchart. Similarly, Lazard India's chairman, K Balakrishnan, resigned. He has not specified his plans yet.
What is adding to the gloom is that many corporate leaders prefer to set up their own M&A teams, instead of hiring bankers unless they need banking solutions. Essar, Reliance and Piramal each have a sizeable M&A team scouting for opportunities across the world.
Analysts say there are still some opportunities for M&As, especially where debt is going out of control for promoters. During the boom, many Indian promoters took massive loans to create assets. As the tide turned, these assets were unable to pay for the high-cost loans taken to buy them.
Analysts say Jaiprakash Industries will sell its cement units in Guajrat for close to Rs 4,000 crore to retire its Rs 53,000 crore of consolidated debt. Similarly, Suzlon promoters will have to sell part of their stake to bring down debt levels. Jet Airways' 24 per cent stake sale to Etihad Airways will be used to pay off debt of promoters and the airline.
Private equity (PE) funds, some of the aggressive investors in India in the past five years, are now finding it tough to exit their investments, as the Initial Public Offer route has dried. Hence, many marquee PEs are finding themselves sitting on a mountain of losses, as valuations fall consistently.
For the rest of the year, bankers say foreign investors will hesitate to invest, as political uncertainty will be on top of their mind. "There is no clarity on who will be the (next) Prime Minister or what will be the composition of the next government. Hence, it makes sense to conserve cash. That will be my advice to any buyer," said a banker with an international firm, asking not to be named.
