Although global investors have a long-term positive outlook for India, Renuka Ramnath, Founder and CEO, Multiples Alternate Asset Management is not very optimistic on capital markets, as she does not see same enthusiasm in private equity (PE) deals as seen in 2005.
However, the asset management company anticipates an opportunistic strategy in 2-3 years backed by window of opportunity seen in corporate restructuring.
Sectorally, they currently do not see any opportunities in the infrastructure space as the sector is yet to see a revival, Ramnath says in an interview to CNBC-TV18. Even as balance sheet re-engineering may attract fresh capital, recalibrating balance sheet might be an issue for infrastructure companies, she adds.
Going ahead, she believes key themes for the year may revolve around deleveraging, consolidation and demergers.
Below is the verbatim transcript of the interview:
Sonia: 2014 was a very good year for private equity investors if you look at both fresh investments as well as exits. Do you foresee the same for 2015 as well?
A: It is difficult to say because in 2014 even if you look at what transactions happened, which is largely concentrated on one sector which is IT and information technology enabled service (ITeS), a lot of e-commerce transactions, business process outsourcing (BPO) transactions. The rest of the sectors particularly infrastructure was next to nothing. I would say that there is a long-term positive outlook for India when we talk to investors all the time and there is interest in knowing the India story, evaluating the India opportunity which was not there a couple of years back but I would not say that they are already to open the purse with the same level of enthusiasm that I saw in 2005.
Reema: 2014 was dedicated to largely to e-commerce. In 2015 do you see it at least to some extent getting extended to the other sectors and if yes, which ones?
A: I expect that 2015 large part of PE transactions will be PE to PE, so it would be much more diversified because it is a question of what assets have matured in the private equity portfolio which will now come up for sale. If I look at our own deal pipeline, it is much diversified; it goes everywhere from specialty, chemicals, manufacturing, healthcare, financial services and so on.
Sonia: You did mention that infrastructure sector is yet to see a revival and everyone is waiting to see some sign of that. What do you foresee for that sector, do you see any opportunities in 2015?
A: I personally do not see any of the opportunity. One of the big challenges for infrastructure sector is going to be how you recalibrate the balance sheet. All these companies need large balance sheets to bid for projects but their current balance sheets have lot of challenges, so how do you reengineer your balance sheet to attract fresh capital, is going to be a challenge for infrastructure.
Reema: Your fund recently exited South Indian Bank. What was the rational for it? Was that matured or are you a bit cautious or do you think that the valuations have hit reasonably level and therefore the exit?
A: It’s a combination of everything. As private equity investor, our job is to enter and exit, our investors would like to see some cash back as well. At the price at which it was trading given that we had entered at a very attractive price, it gave us reasonable returns, so it was a great opportunity for Multiples to return some capital to the investors and we could also get interest from domestic investor which also helps the bank. We are very conscious of the fact that when we exit our companies, we have to leave our portfolio companies in a better place than where we started. So I thought it was a win-win for both Multiples and the bank.