Investment banking trends: Year 2022 may create new business opportunities on higher growth expectations

By Jyoti Prakash Gadia

The year 2021 proved to be a bountiful year for investment bankers with unprecedented opportunities emerging across various verticals in the field of finance and investments.

Despite the lurking shadow of the omicron variant and the possibility of a third wave, the year 2022 shall hopefully be more eventful and create new business avenues for investment bankers in the wake of consistent turnaround and revival of the affected sectors and a higher growth trajectory expected.

Fresh opportunities arose as an account of the new normal created by the covid-19 pandemic, the spirit of resilience created in the ecosystem by the various stakeholders including the government, RBI and the businesses across select sectors. The need for digitalisation and online business created a new set of activities and use of technology across various sectors of the economy. Health, Pharma and education emerged as the need of the hour creating demand in these sectors. The government also brought out enabling policies and Reforms for growth across various sectors

In the context of investment banking, all verticals of the ecosystem like IPos, mergers and amalgamations, private equity gained momentum and witnessed unparalleled growth.

IPOs

Indian startups raised close to $ 39 billion in the year 2020 – 21 which is more than two times the size in comparison to the previous year. This has happened across various sectors like IT aggregators, financial services, retail, education and Pharma. India has the competitive advantage of having achieved great success in the field of software and further usage of the same in digitalization and all other related sectors is a logical opportunity for entrepreneurs.

The latent potential is available in the sectors like Fin techs, PLI scheme manufacturing and retail besides mega IPO of life Insurance Corporation likely to be in the year 2022.

Mergers and amalgamations

This Mechanism has also emerged as a major avenue of investment activity. More than 190 cases of mergers and amalgamation of various sizes were reported in 2021 against around 80 cases in the previous year. Large business houses like Tata, Reliance, Adani Have shown interest in the field of retail, Pharma and renewable energy with the acquisition of a number of entities. Companies like Byju’s have set new standards in the field of education promoting the emergence of new opportunities in this sector.

Economies of scale, cost-effectiveness and better-earning Capacities are primary drivers of mergers and acquisition activities. With further opening of the economy, reforms and advantage of new schemes, established players are bound to be Swift and create room per mergers and acquisitions in the coming year too.

Private Equity

With the resilience and revival capacity shown by the Indian economy after the second wave of covid 19, private equity players have indicated confidence in the economic growth story of our country. The large number of Private Equity funds – venture funds have shown interest particularly in the field of renewable energy/ infrastructure as a whole, as also in emerging fields like IT enabled services and Pharma, with the deployment of over US$50 billion. Real estate is one sector through Reits in which foreign players are planning to come in a big way. All this augurs well for the private equity vertical with attractive initiatives/ steps by the government in the field of FDI

NMP

The government has also set the ball rolling by announcing the Rs 6 lac crore National Monetization Plan across various infrastructure sectors. This will also attract large scale investments and involves mechanisms like direct assignment/ transfer on the lease, and INVITs. Working on mutual fund mechanism Invites has been proved successful in the road sector/ power sector, and entails the involvement of smaller investors too.

Ultimately success stories can be created with mass level small and medium scale investors to be attracted for all productive avenues of investment and investment bankers have a significant role in the creation of such a robust and thriving ecosystem

Note of caution

Any adverse change in events on account of covid 19 third wave may dampen the sentiments and impact exuberance in the investment scenario. One needs to be careful and work in a planned way for creating sustainable mechanisms as enablers of growth. Needless to add, realistic valuations form the fundamental underlining factor and pricing needs to be on a rational basis in order to avoid any volatility and uncertainty.

(Jyoti Prakash Gadia, Managing Director, Resurgent India. Views expressed are the author’s own.)