The market is now in the second half of 2014 but how has deal street fared in the first 6 months of this year? CNBC-TV18 spoke to Raja Lahiri, partner-Transaction Advisory Services, Grant Thornton India to get the complete overview of the mergers and acquisitions in the first six months of the year.
According to Lahiri, pharma and e-commerce have been the big winners in the first half with mega deals like Sun Pharma acquiring Ranbaxy and Flipkart buying out Myntra. He also sees a pickup in real estate and infrastructure, though at a slower pace, and expects some more action in the two sectors going forward.
Below are excerpts from the interview:
Q: It has been six months of the year, how would you rate the M&A activity seen so far?
A: Great. It is USD 23 billion in the first six months which is up by 31 percent in value terms and 20 percent in volume terms. Overall, we have seen a clear revival of the M&A action and with the new government in, there is certainty in the deal street back again.
Q: What was that one big ticket deal that was the biggest news maker in the first six months that caught your attention and what about the sectors that saw most M&A activity?
A: In terms of big, it is clearly been Pharmaceutical, the two interesting facets, one is domestic transaction are back, we saw Sun Pharmaceutical Industries taking up Ranbaxy Laboratories for USD 3.2 billion, which was the biggest deal in the first half.
Second is the action in the e-commerce space with Flipkart buying out Myntra, and a lot of private equity money being put in the e-commerce space including Flipkart and Snapdeal. e-commerce and pharmaceuticals have clearly ruled as far as sectors are concerned. Third would be the progress in real estate and infrastructure and I would definitely see far more action in these two sectors going forward.
Q: With the RBI notification coming in last night, the Budget is now over, what really is the outlook for deal street from here on?
A: With the new government in place there is certainty back in the air which was missing in action, so one is certainty is very important for business as well as deal sentiment that is absolutely back. In fact from a Grant Thornton perspective the business optimism from India is highest in the world and that is reflecting in the deal sentiment.
The focus on investment, manufacturing is crucial and has been highlighted in the Budget. However, one would have looked at the General Anti Avoidance Rule (GAAR) to get more clarity, but overall it looks pretty solid. We will see lot of action on deals and as we talk the deal discussions, the due diligences, valuation discussions are absolutely on. So we are in definitely for an interesting next quarter and a half.
Sun Pharma stock price
On July 16, 2014, Sun Pharmaceutical Industries closed at Rs 743.65, up Rs 4.95, or 0.67 percent. The 52-week high of the share was Rs 753.00 and the 52-week low was Rs 475.60.
The company's trailing 12-month (TTM) EPS was at Rs 1.45 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 512.86. The latest book value of the company is Rs 41.64 per share. At current value, the price-to-book value of the company is 17.86.
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