Global investment bank Moelis & Company has advised some of the biggest fundraise and merger and acquisition (M&As) deals in recent times. These include Aster DM Healthcare’s Gulf business sale to Fajr Capital and a BlackRock Real Assets-led consortium’s investment of Rs 4,000 crore in Tata Power Renewable Energy, among others. Manisha Girotra, CEO, Moelis India, tells Rajesh Kurup and Raghavendra Kamath that while private equity (PE) deals will continue in the immediate future, the big bets in the M&A space will be made after the elections. Excerpts:
What is the outlook on global investments in India?
With every large PE and sovereign wealth fund is looking to invest in India, the flows from PE and sovereign wealth funds would remain at about $60-80 billion per annum. This was about $70 billion in 2022, $35 billion in 2023, while 2024 is also looking good. In terms of M&A, the market is basically 60% PE and sovereign wealth funds, and 40% by Indian domestic firms. We expect further large deals – such as Reliance-Disney and Adani-Holcim – while companies in pharma space would continue to consolidate. PE firms continue to be very positive on India.
Fundraising through initial public offerings (IPOs) is also on the rise. Do you see any new emerging trends?
Earlier, for a deal larger than a billion-dollar one in India, we had to look at global depository receipts (GDR), American depository receipts (ADR) or a strategic investor. Now, we can raise a billion-dollar overnight, that too, in a single tranche. Investors are also not worried about exits — a big problem till three years ago. Earlier, IPOs used to be mainly through primary stake sales, but now there is a rise in offer for sales too. Also, PE exits through strategic routes and capital markets are good, and the rise in the number of exits has made investors more confident.
Which are the sectors Moelis is betting on?
For us, the sectors which have done well were healthcare services, pharma, IT services and renewables. These mirror the economy.
How will the IPO markets fare in FY25?
We expect the second half of FY25 to be very busy. Now, IPOs don’t only depend on foreign money as domestic investors, high net worth individuals, and retail investors from every little town are channelising money into the stock market. IPOs would come in IT, pharma, manufacturing, EVs and renewables as investors are chasing growth. A lot of exits will be led by the PEs. These would be across pharma, consumers, IT services, tech, manufacturing and energy transition firms, among others.
Do you see M&A activities rising after the elections? Have deal valuations risen?
Now, each deal is about $1-1.5 billion as valuations have risen. Yes, typically pre-elections, M&A, especially on the corporate side, tends to be a little slower even though Reliance-Disney just happened. The larger bets would be made post-elections. Meanwhile, PE deals will continue.
Do you see a rise in private capex? Which are the new emerging sectors?
The private sector is looking to increase capacities, and with schemes such as PLIs (production-linked incentives), this year is going to be different. With the China+1 strategy, semiconductors and manufacturing by MNCs in India would increase. We are increasingly becoming the factory to the world.
Are buyouts increasing in India? Do you think deal activity is slowing in the mid-market space?
Definitely. This is because foreign investors have gotten more comfortable with running businesses on their own, and now they don’t feel they need a promoter. There’s enough professional management in India who can successfully run businesses. A lot of the second generation is not interested in the same business. Deal activities are more active in public markets, while in the private space, they are looking for larger scale deals.
Do you see PEs launching India-specific funds going forward? Will deal sizes go up?
Being one of the largest economies in the world, we deserve it. India grew too fast in the last 3-4 years, and investment portfolios also need to be reoriented. The country does need to be a part of Asia allocation fund of a PE. We will see more billion-dollar deals. At present, $800 million is the norm, which is slowly trending towards $1 billion. The sweet spot for India will always remain around $500 million to $1 billion, other than the tech sector, which will continue to see $200-300 million deals by venture capitalists.
How are global limited partners (LPs) looking at India?
Foreigners are more optimistic than us on our growth, young population, public markets and the exits, among others. The most positive thing is the policy framework, and the hard structural reforms such as GST (goods and services tax) we did in the last 10 years.
