While the Centre is pushing hard India’s growth story, it appears that investors are waiting for more policy reforms to make big ticket investments. CEOs and corprorate decision makers are however bullish and optimistic about the potential India has. As one of the top lawyers in the country Akshay Chudasama, Managing Partner and Head of Mumbai office, Shardul Amarchand Mangaldas & Co is closely associated with a number of big corporates and has the pulse of the actual mood in boardrooms. Business Line met Chudasama to get a sense of how perceives the investment climate.

Q: What is your sense of the overall investor sentiments towards India?

Ans: I think it’s really active. If you look at us as a barometer of what’s happening in the economy, you will see that it is doing pretty well, and it’s likely to do well. Our lawyers are basically at over 80-90 per cent capacity, which is a very healthy sign. Besides, a lot of deals are happening across sectors. The one underlying theme you see a lot more is the coming up of stressed assets, which was not happening earlier. The government also seems to be focused on making sure things move in the right direction. So you have deals that indicate an increased interest of FDI. However, there is also a lot of domestic interest now. Over the past 12-18 months, we have seen several new investors who never looked at India before, are now looking at India. This is good news, because it means whatever we are doing is working somewhere.

Q: Which are the sectors that have seen heightened activity in terms of FDI coming in?

Ans: A lot of action has been happening in the infrastructure sector, particularly in roads and renewable energy. There is also interest in pharma and FMCG sectors. In so far as real estate is concerned, the scenario is a bit patchy. Overall though, there is a lot happening across the board.

Q: But who is investing? If you look at the top 10 Indian corporates, they are all highly leveraged and highly stressed…

AC: To understand this, let’s take a case in point — the LafargeHolcim divestment. This divestment may have been a result of regulatory environment, but if you look at the composition of the bidders, there were several Indian groups and the final successful bidder was also an Indian group. Whether it was JSW or Piramal or anybody else, they basically tied up with private equity funds or financial investors. Such partnerships are common these days. So even if there may not be as many Indian groups who were as hungry as they were in 2007-08, there are enough players who are writing big cheques. They are either finding the leverage through debt or basically looking at financial investors to come in with them.

Q: What is happening in the private equity (PE) investments?

AC: When you look at the PE industry as a whole, you will see that every single transaction has got multiple bidders. Two years ago, if you were looking at PE deals, the ability to get a 90-day exclusivity period was pretty much the norm. An investor could say, “Look I am willing to sit on table but it has to be only my deals, no one else”. Things have changed and today, competitive bidding is the norm. In every transaction we see heightened conflicts levels, as each deal has got 5-6 people chasing it. LafargeHolcim as an easy example which is out there in the public domain but there are several others which are not.

Q: Last year also if you look at LP interest, it was underweight. How do you see it going this year, from March until July?

AC: Instead of just looking at LP interest, we should look at the kind of funds we are dealing with, as there are several people who are raising India funds. They may not be fully India-specific, some of them are actually Asia-specific with an India component. But funds are being raised. Essentially, if there’s a good deal, you will easily find 4-5 guys who will be ready to write cheques in excess of USD 500 million.

Q: What is causing this change? Is it because assets are now on sale?

Ans: This change can be attributed to a combination of factors. If you have a fund and you have an emerging market component, you would look forward to India as an option due to the competitive advantage it has in terms of emerging markets. Secondly, the Indian government has given the much needed encouragement to the overall market scenario by pushing the required regulation along with promoting the general sentiment. Case in point — the banks are getting tougher on promoters. Earlier a promoter would say, “It’s not my problem it’s the bank’s problem”. The general macroeconomic fundamentals seem to be positive. Inflation is under control. Other countries like Brazil, Russia and China are considered less attractive as an option due to their slow pace.

Q: What about valuations? We have seen valuations down for some big companies.

Ans: Valuation is becoming a problem because all of a sudden, the sell side is getting greedier, as they know that there are ample buyers in the market. But if we look at stressed assets, their valuations are reasonable, people are willing to take a higher cut.

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