In an interview to CNBC-TV18, Prashant Mehra, Partner, Grant Thornton India shares his views on all the merger and acquisition action in January and which sectors will continue to attract deals going ahead.
Below is verbatim transcript of the interview:
Q: The overall M&A deal activity or the deal value stood at USD 3.4 billion. If you compare this to 2014 this is definitely higher but compared to December 2014 when we actually saw the deal value at USD 4 billion this is lower. Would you say that the deal volume or the deal value is now tapering out a bit or is this seasonal change?
A: Actually there is a reason why we are seeing the deal value and deal volume going down as compared to December 2014 and the reason for that is that this is all close transaction and close transactions are always a flavour of the work which has gone in the last month.
December primarily being a holiday month, only 15 days of work would have happened and that is why in January there are lower deals compared to December.
The right comparison, an apple to apple comparison would be if we compare this to January 2013 and if you compare that then deal value has gone up by 112 percent and deal volumes have gone up by about 36 percent.
Having said that, generally, the trend is that people are getting a little tired of the optimistic flavour and we need to start seeing some data points coming on and hopefully we will see more momentum growing in the next couple of weeks and months.
Q: Do you feel that with the Budget around the corner we could see an uptick in terms of the deal value or the deal volume and also if I look at the report in January there seems to be a significant amount of action from IT and ITES (Information Technology Enabled Service). BFS as well to an extent but it largely seems to be dominated by the IT and ITES sector. Will this probably taper down a bit, could we actually see other sectors emerging in the next couple of months and if yes, which are those sectors?
A: Firstly the Budget, people have lot of expectations from the Budget because this is the first major annual Budget which the new government will take up. So there is a lot of optimism riding on the new Budget which will come in. There are a lot of data point sops which people are expecting especially in the infrastructure sector.
Infrastructure is a macro sector. So anything to do with infrastructure will lead to growth and momentum in other sectors as well. Specifically, talking about IT and ITES we have seen this again being the hot sector for January.
The reasons are that M&A there has been a fair trend there and the reasons for that is that we have been seeing a lot of consolidation trends and this consolidation trends would perhaps continue over the next two to three quarters. So that explains the increase in activity and the momentum increasing if not remaining the same.
Private equity IT and ITES probably is a macro thing but most of the transactions are actually happening in the micro e-commerce sector within IT and ITES. This continues to be the flavour of the month and with the change in the consumer retail activity, we see this trend continuing and perhaps even growing in the next few quarters.
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