Inbound interest in Indian companies for mergers and acquisitions (M&As) will continue to be a challenge given the high valuations in the local market, Peter Guenthardt, head of Asia Pacific Global Corporate & Investment Banking at Bank of America, said in an interview with Mint. He feels that with the dust settling on the new tariff regimes, equity capital markets (ECM) activity in India is likely to bounce back with mega initial public offers (IPOs) hitting the street soon.
“Inbound M&As remain somewhat challenging due to valuation gaps. Paying more than three times the earnings multiples for Indian assets compared to home markets may be hard to justify,” Guenthardt said. While India’s rapid growth attracts foreign strategics or global companies looking to buy assets in India, much of the growth is already priced in, he added.
“This is why many private equity players would be willing to sell 100% of a business rather than pursue IPOs. However, given high public market valuations in India, many decide to list and sell out over time to maximize returns,” he said.
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Guenthardt, who was in India last week for BofA Securities’ annual investor conference, remains bullish on India’s ECM activity. “I think over the next 12 to 18 months, we’re going to see a wave of billion-dollar-plus IPOs hitting the Indian market. We expect ECM activity to remain high,” he said.
The depth of capital markets here is helping deals and IPOs go through, a phenomenon that makes India stand out, said Guenthardt. “Last year, India led the world in IPO volume and proceeds, cementing its position as a global capital markets powerhouse. India has done a phenomenal job of broadening the scope of the mutual fund sector by attracting retail participation on a large scale. This is a major win, when the market performs, retail investors benefit as well.”
Some of the marquee transactions that Bank of America was involved in include BAT’s $2.1 billion block trade in ITC Ltd, Vodafone’s $1.8 billion block trade in Indus Tower, Swiggy’s $1.3 billion IPO, Bajaj Housing Finance’s $782 million IPO and Ola Electric’s $734 million IPO.
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For Guenthardt and his team here, there are significant advisory opportunities due to Indian companies with global ambitions. “A lot of Indian companies have global ambitions. Large corporations that we speak to are excited about Europe, America, and they have a high affinity with the Middle East. I think they will continue to be very active in these markets,” he said.
Guendthardt expects a steady deal flow from the sponsors (private equity) side. “Private equity allocations to India have risen. If you talk to most of the large private equity firms, they’d tell you that Asia funds now allocate 30-40% to India, up from 15-20% five years ago, underscoring a robust outlook,” he said.
The macroeconomic growth in India is comforting global investors and bankers. “India is one of the biggest opportunities that is out there, not just in APAC, but globally. Looking over to the five to 10 years, the stability in governance, the return on investments that we saw, the massive infrastructure build-out by the government, it’s going to catapult India to the next level,” Guenthardt said.
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“Continued pro-market reforms are expected to drive growth,” he added.
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