'We may not see aggressive pricing'

Q&A: Vallabh Bhansali

Vallabh Bhansali, chairman of Enam Financial Consultants, tells Rajesh Bhayani in an interview that primary market issues, which are not aggressive in pricing, will now succeed. Excerpts:

What are the changes taking place in the field of investment banking?

India tops the growth in mergers and acquisitions (M&As) and Indian companies are raising funds in new markets such as AIM and Singapore. Many acquisitions are leveraged buyouts and they mean a lot more potential for investment banking.

In such circumstances, all investment banks have to think of India and are in the process of reassessing their capabilities to decide whether to go solo or form joint ventures. Investment bankers are nimble footed by nature and there are no swan strategies.

What is Enam's strategy?

Our strategy has always remained conservative. We are good at capital market and advisory business. Going solo or opting for a joint venture is always an evaluation process. Ultimately, we have to do business, which is good for clients and shareholders.

How do you see the domestic market taking shape in the near future?

The market will keep growing with the growth in GDP. Many new changes are also on the cards. The debt market will see tremendous growth, with increasing leveraged buyouts. We will soon see the emergence of without-recourse papers.

The recently formed Mortgage Guarantee Fund will witness huge business in the coming years. The market for secondary and tertiary papers and many more derivative products will emerge. Limits for overseas investments may be increased further.

There will be a bright scope for commodity exchanges, as corporates such as Reliance and Bharti enter commodity business. Greater globalisation will enable us to have more global financial products.

Many new issues have listed at discounts. What will be the future of primary and secondary markets?

The valuation of recent IPOs has begun bearing results. I think we may not see more aggressively priced issues. In the secondary market, a correction of 15 per cent is not a big thing and what we are seeing now is a correction and a shake-out. It is the sharpness of the correction that has bothered weak investors.

Even if we grow at a lesser rate, a bull market can still be there. For example, if the market corrects by 30 per cent, the same correction will set the stage for a bull market. If we lose six months' gain in 15 days, the next six months can be a bull market.

What are the challenges before the global financial markets?

The world's centre of gravity is shifting from developed markets to emerging economies. Understanding the change in all its colours will require some efforts. I mean, most forecasting models and strategies were built keeping in mind the Western markets.

They have to be changed. The economic and the behavioural patterns of developing economies are not yet known. It will require a longer time to understand them. It will require a huge data base, which is not available at present. This will be a major challenge.

How do you see India's current macro-economic situation?

There is a need to remove certain bottlenecks in the economy. Take for instance the SEZ policy. The government announces the policy based on which many companies work out proposals.

They spend management time and resources and then there is a reconsideration of the policy. In such cases, it is better not to announce a policy.