Indian Market: review and forecast
- People, including foreign investors, are prepared to invest and trade stock due to the large capital available.
- Lots of confidence in acquisitions as India is looking attractive as other countries are slowing down.
- Tech has to move up the value chain, which results in many M&A deals.
For distressed assets, law and amendments came quickly as they try to fix the
- Supporting bids are rare as there is a reluctance in putting cash on the table despite India’s growing economy.
How the Insolvency and Bankruptcy Code will dictate M&A in India
- The IBC is missing an “R”, for restructuring. Restructuring is an important part to IBC.
- In 10 years the process should be an art instead of a science and we will start to question the role of the promotor. The end game is to replace the promotor, whilst nothing else has changed.
- The availability of data give promotors an unfair advantage, when they are mixed into the bidding.
- There is a demand supply mismatch, as there is too many inbound and too much liquidation.
- In the banking/tech side, movment away from traditional banking towards bond marking, due to consolidation in the bank sector.
Sector Focus: Tech M&A
- Large companies are targeting and acquiring smaller enterprises and start ups. Despite not giving a large turnover, large companies are attracted to the data start-ups have.
- This provides the question of whether data is the new currency or oil of our generation. Should there be thresholds for data a company can have?
- There is high expectation for India to be similar to China. Looking at the boost in retail spending, there is M&A activity across online retailers across sectors.
- With the huge technology disruption, businesses are being disrupted and the start-up concept is emerging in India. There is a need for the proposed data protection legal framework to encourage and promote tech companies at the same time.
- GDPR has affected the entire world - are we looking at data protection or isolation. The consequences if data is localised will have an affect n companies and how they use their data.
Cross border M&A: domestic focus, consolidation and more
- Trade war has not affected M&A activity directly.
- Main driver of M&A activity is technology, with many conversations looking at online/offline M&A.
- Introduction of IBC has changed the way law firms look at their business model.
- To attract foreign capital, regulatory tax is important, especially as the cash is needed.
- The drop in outbound activity whereas there is activity in inbound due to the confidence of Indian competence, there is a want to spend money on the capital side.
Navigating the healthcare market in India
- Indian pharma’s pay a premium for acquisitions as they are desperate to add to their portfolio and have a drive to fill the pipeline.
- Another driver to acquire companies is to gain their manufacturing capability as it will be more cost effective.
- Suggestion to introduce new laws to healthcare regarding clinical trials, as it targets illiterate population.
- When looking an international companies coming into India, they already comply with their own regulations, this will affect how the healthcare work is performed and which regulations they comply with.
The state of private equity in India
- Business environment has stabilised over the past year.
- Promoter: finding talent is difficult, not much say in hiring talent, there needs to be a mind-set change. Even though a promotor is legal, there needs to be more specific experience in order to become a promoter.
- Regulators are open to suggestions, and the rules keep changing. Unable to predict what penalties a regulator will take up in an industry.
- No participation in IBC from PE companies.
The shifting Indian tax landscape
- Change in corporate tax rate, it is currently quite high compared to other countries. In order to attract foreign investments, tax rate has to go down.
- GST puts everything under one roof
- GAAR: biggest tax reforms this country has seen in regards to international taxation
- The need to identify the purpose due to purpose test under BEPS
- Tax authorities cannot cushion under the principled current taxation laws.
- Tax laws allow losses from M&A to carry forward.