Religare Capital Markets (RCM), the Religare group’s investment bank, is eyeing a share of Indian investment banking deals. The bank has started operations in markets in the US, UK and Southeast Asia and is currently working on deals worth $2 billion in the i-banking space. In an interview with Reghu Balakrishnan, Tarun Kataria, chief executive officer, Religare Capital Markets India, talks about RCM’s growth strategy and his outlook on financial markets. Edited excerpts:
Do you expect a revival of the primary market in the near future?
We expect to see some revival of the primary market in the third quarter, when the threat of inflation starts fading and foreign institutional investors (FIIs) are back from their summer holidays. This, of course, is premised on the absence of some scandals that have plagued our markets in the past few months. The markets would be helped materially by policy initiatives being worked on in Delhi.
Do you think public sector unit (PSU) issuances would crowd out private ones?
In a buoyant market, I don’t believe PSU deals would crowd out private sector deals. Ultimately, it comes down to the value and, from an investors’ perspective, how the deals are priced. It is s important that stakeholders benefit from any issuance.
Do you expect the secondary market to continue its recent good run?
The ‘emerging markets to developed markets’ flows are now turning back to ‘developed markets to emerging markets’, which is what has been propelling emerging markets. This reversal was triggered by a sense that inflation had peaked, central bankers in emerging economies are not engaged in competitive devaluations and these markets have the ability to manage ‘hot money’ inflows. I expect to see this continue and drive emerging markets, including India, further. However, I expect gains to be tempered and volatile.
Currently, to what extent are FIIs interested in Indian initial public offerings (IPOs)?
This is untested, as currently there is an absence of any real issuance activity. A few quality IPOs, with strong brand recognition and managements, are expected in the market in the near future. That said, FIIs remain positive on the Indian market and are now starting to express enthusiasm in the secondary markets as well.
Would FIIs be interested in the secondary market in 2011?
Compared to 2010, I expect to see FII inflows relatively muted in 2011. Last year, markets were cheap, inflation was not an issue and liquidity from Quantitative Easing-I and Quantitative Easing-II in the US meant a gush of flows into emerging markets, including India. Today, there are a number of concerns for investors, including the possibility of US rates rising or the withdrawal of liquidity. Many investors are therefore, in a wait-and-watch mode.
What are Religare’s plans for overseas expansion?
Religare Capital Markets is focusing on emerging markets like South Africa, Turkey, Dubai, Sri Lanka and Indonesia and developed markets like Australia, Singapore, London and New York. Over the next few months, we would cover around 800 stocks across the emerging markets. FIIs accessing multiple emerging markets through one firm offer us a competitive advantage. Corporate clients looking at acquisitions in in emerging markets will also benefit from our capabilities.
What is Religare’s exposure to mergers and acquisitions (M&As) and private equity deals?
Religare Capital Markets has been in its present avatar for less than a year. We have around $2 billion worth of cross border deals in the pipeline, which include both inbound and outbound M&As.
