Indian acquirers preferred over others

Source : The Economic Times
Dated : 15/12/2006

Indians are turning out to be preferred acquirers for investment bankers in the West with a sell mandate. Indian corporates are being seen as job creators as against private equity investors who are seen as asset strippers.

Speaking to ET, I-Sec managing director S Mukherji said that one of the biggest investment banking opportunities for the company was cross-border acquisitions. “Right now, most investment bankers in the West have sell mandates. On the buy side are private equity investors,

Chinese and Indian corporates. Indian corporates are turning out to be preferred buyers because most of the Indian acquisitions overseas have done well, and there is a very good feedback about them.”

The reason why overseas sellers prefer Indian acquirers is that employment tends to go up after an Indian acquisition since Indian corporates use the company as a platform for overseas expansion.

A lot of Indians are buying front-end to move up the value chain. They are buying loss-making businesses and making them profitable. According to Mr Mukherji, he expects to see action in overseas expansion in auto components, textiles, pharma, pulp and paper, iron ores and engineering. In addition, Indian corporates are actively looking for acquiring global FMCG brands.

On the retail broking side, I-Sec sees a huge opportunity as the share of equities improves significantly in household savings. “From just about 1%, equities have grown to account for 6% of the household savings.

Given the size, even a 1% increase is a massive amount,” said Mr Mukherji. I-Sec already has a sizeable chunk of the online broking market. Of the 1.9 million registered online broking account holders in the country, ICICI Direct has close to one million.

“As of now, only 0.7% of India’s population is demat-enabled, which means there is a huge potential waiting to be tapped in the retail brokering segment. As the leader with one million online broking customers, we intend to capitalise on this large untapped market and expand our retail broking business,” said Mr Mukherji. He added that considering that internet broking services are turning to be a commodity, advice will be the major differentiation. The company plans to leverage its capabilities in research for this purpose.

I-Sec has inherited a sizeable retail broking business following the merger of group company ICICI Web Trade with I-Sec’s broking subsidiary. This new business unit is expected to contribute a third of the company’s revenues, with investment banking and bond trading also contributing equally. I-Sec, which is already into IPO distribution, is planning to convert the first time equity subscribers into internet account holders.