India will continue to dominate M&A financing: experts

Mumbai, Sep 13 (UNI) Despite choppy market conditions and shocks from US mortgage crisis, India will continue to dominate as an active participant in the outbound Merger and Acquisition (M&A) deals in the ensuing decade, say experts.

While nearly six per cent of the total acquisitions in Asia were financed by Indian funding houses in year 2006 and doubled in the followed year, banks and other lenders in the country still remain under pressure in terms of risk weighted assets shadowing the growth trajectory.

''Sub prime problem is not yet gone and may persist in near term affecting the lending capability of the banks and other lenders.

However, India continues to be a major force in financing outbound acquisitions,'' said State Bank of India CEO R Sridharan while addressing a bankers conference here.

Out of the total M&A deals, nearly 81 per cent of the acquisitions were carried out by banks in year 2002 while the figure was just 45 per cent in year 2007. This points to the growing participation of funding houses and other institutions as financers for outbound acquisitions. This apart, outbound acquisitions exceeded the inbound deals during the period.

Considering the recent trends, M&A market in the region is tending more to corporate-led quality deals which will in turn open huge opportunities for Asian markets.

Nalin Nayyar, MD of the India Investment banking, Lehman Brothers, said the excess liquidity conditions and nearly predictable stream of capital flows has insulated the Indian system from the impacts of the so called US sub prime crisis prompting many of the sponsors to return to the M&A deals for relatively smaller transactions.

''Strong market position in respective industries, stable and predictable cash flows, low business risk and low capital expenditure continue to highlight India's prospects in the M&A market. That, Indian acquisitions are done through overseas special purpose vehicles (SPVs), is also benefiting the country,'' said Mr Nayyar.

Among the other things that favor the region, include lesser impact of global volatility in Asia-Pacfic market due to ample liquidity in major markets and robust economic growth. Asian markets are in a much better shape than the US due to the ample liquidity, he said.

UNI