Investment Banking Trends: 2022 Could Create New Business Opportunities on Higher Growth Expectations

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2021 has proven to be a banner year for investment bankers with unprecedented opportunities emerging across various verticals in finance and investments.

By Jyoti Prakash Gadia

2021 has proven to be a banner year for investment bankers with unprecedented opportunities emerging across various verticals in finance and investments.

Despite the looming shadow of the omicron variant and the possibility of a third wave, 2022 will hopefully be a more eventful year and create new business opportunities for investment bankers in the wake of a turnaround and continued recovery of affected sectors and an expected higher growth trajectory. .

New opportunities have arisen due to the new normal created by the covid-19 pandemic, the spirit of resilience created in the ecosystem by different stakeholders including government, RBI and businesses in certain sectors. The need for digitization and e-commerce has created a new set of activities and use of technology in various sectors of the economy. Health, pharmacy and education have emerged as the need of the hour, creating demand in these sectors. The government has also put in place enabling policies and reforms for growth in various sectors

In the context of investment banking, all verticals of the ecosystem such as IPOs, M&As, Private Equity have gained momentum and witnessed unprecedented growth.

IPOs

Indian startups raised nearly $39 billion in the year 2020-21, more than twice the size from the previous year. This has happened in various industries such as IT aggregators, financial services, retail, education, and pharmaceuticals. India has the competitive advantage of having achieved great success in the field of software and its further use in digitization and all other related sectors is a logical opportunity for entrepreneurs.

Latent potential is available in sectors such as fintech, PLI program manufacturing and retail, in addition to the Life Insurance Corporation mega IPO likely to take place in 2022.

Mergers and Mergers

This mechanism has also emerged as a major channel of investment activity. More than 190 cases of mergers and amalgamations of various sizes were reported in 2021 compared to around 80 cases the previous year. Major business houses like Tata, Reliance, Adani have shown interest in the retail, pharmaceutical and renewable energy field with the acquisition of a number of entities. Companies like Byju’s have set new standards in the field of education encouraging the emergence of new opportunities in this sector.

Economies of scale, profitability and more remunerative capabilities are key drivers of M&A activity. With a more open economy, reforms and the benefit of new programs, established players are bound to be quick and also create room for mergers and acquisitions in the coming year.

Capital investment

With the resilience and revival capacity shown by the Indian economy after the second wave of covid 19, private equity players have indicated their confidence in our country’s economic growth story. The large number of private equity funds – venture capital funds have shown particular interest in the renewable energy/infrastructure field as a whole, as well as in emerging fields such as IT services and pharmaceuticals, with the deployment of more than 50 billion US dollars. Real estate is a sector through REITs in which foreign players plan to come in force. All this bodes well for the private equity vertical with attractive government initiatives/approaches in the area of ​​FDI

NPM

The government also kicked off the ball by announcing the national Rs 6 lac crore monetization plan in various infrastructure sectors. It will also attract large-scale investment and involves mechanisms such as direct assignment/transfer on lease and INVITs. Work on the Invites mutual fund facility has proven successful in the road/power sector, and also involves the participation of retail investors.

Ultimately, success stories can be created with small and medium scale mass investors to be attracted for all productive avenues of investment and investment bankers have an important role in creating an ecosystem as strong and prosperous.

Note of caution

Any unfavorable change in events due to the third wave of covid 19 can dampen sentiment and impact exuberance in the investment scenario. You have to be careful and work in a planned way to create sustainable mechanisms as catalysts for growth. Needless to add, realistic valuations are the fundamental underlying factor and pricing should be rational to avoid volatility and uncertainty.

(Jyoti Prakash Gadia, Managing Director, Resurgent India. Opinions expressed are those of the author.)

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