Deal volumes in India are set to surge as embattled founders sell businesses to tide over a cash squeeze, according to Axis Capital Ltd, the investment banking unit of one of India’s largest private-sector lenders.
“As the funding situation erodes, founders are selling businesses to deleverage, or are raising equity to gain an edge over the competitors,” Chirag Negandhi, co-chief executive officer of Axis Capital, said in a recent interview at his office in Mumbai. “On the equity capital market side, most banks and non-bank lenders will have to keep tapping the market as the well-rated ones are finding more opportunities to grow.”
Indian tycoons from media mogul Subhash Chandra to Anil Ambani have been on an asset sale spree to pare debt as refinancing options dry up amid a prolonged shadow banking
While the government and the nation’s central bank have announced a slew of measures to calm the credit market, investors are still wary as companies continue to delay or default on payments.
The financing squeeze has already taken a toll on the country’s economic expansion, which in turn erodes borrowers’ capability to repay further.
The World Bank cut India’s economic growth forecast by the most among South Asian nations, saying the nation’s cyclical slowdown is severe and the weak financial sector is weighing on growth.
Axis Capital has the second largest market share in managing initial public offerings in India this year, right after ICICI Securities Ltd, data compiled by Bloomberg show.
The investment banking unit was an adviser on the sale of stressed GMR Chhattisgarh Energy Ltd and also managed Larsen & Toubro Ltd’s acquisition of stake in Mindtree Ltd.