Finance Friday: Deal Radar, Acquisitions , Rate Hike

Deal Radar: Finance Sector Seeing Consolidation, Aptech Expanding

The M&A scene has been a little dull off late but there are signs of it picking up albeit slowly.We covered the Bharti-Warid deal earlier which was a a comparatively big ticket deal.However, it is the finance sector that is seeing a lot of consolidation.There is increased M&A activity in the AMC space as the companies are trying hard to maintain profitability.A few noteworthy deals have materialized in the recent past which signal the re-shuffling in the financial services sector.

• Edelweiss Capital has  Lalbhai Group’s Anagram Capital for Rs164 crore. Anagram Capital has a country wide network with a huge client base.Edelweiss Capital will be looking to expand its national foot print and inorganic growth seems the way they want to grow.Anagram Capital was searching for suitors at a tentative price tag of 250 crores but the lack of interest helped Edelweiss grab the deal for much less.
• Another financial player India Infoline has acquired Orient Global’s stake in two of the company’s unlisted subsidiaries India Infoline Investment Services (IISL) and India Infoline Marketing Services (IIML), for USD 80 million.This acquisition will expand the current portfolio of the listed India Infoline.
• Aptech has made a significant move in expanding its product portfolio by acquiring the animation major MAAC or the commonly known Maya Entertainment.The deal value is Rs 76 crore.It is part cash – part equity deal and analysts suggest that Aptech has managed to buy the company for cheap.MAAC has been pretty successful and raking in revenue of close to 125 crore.

It has been a promising start to the year for India as far as India’s M&A is concerned.M&A deals worth USD 3 billion (around Rs. 13,850 crore) have been announced so far this year, the highest year-to-date volume on record. The report by global deal tracking firm Dealogic points out that,

“India targeted M&A volume reached USD 3 billion via 73 deals so far this year, up 24 per cent from the same period in 2009, making it the highest year-to-date volume on record ”

With economy on its path to recovery , organizations seem keen to expand inorganically.How will these deals materialize into increasing profits will be interesting to watch.

Food Inflation continues to rise, RBI contemplating CRR hike

Rising Food Inflation continues to traumatize the RBI with no signs of easing down.In the macroeconomic report published by RBI , it has mentioned that Inflation Outlook is indeed a worrisome sign going forward and RBI’s primary focus will be to tame inflation.However, RBI has maintained a positive outlook on the growth of economy.There are also speculations that a CRR hike might be coming very soon.To get the economy back to its feet, RBI had infused a lot of liquidity in the market by reducing the rates.Now, with the economy picking up , RBI might be considering revising the CRR rates to ensure that the Inflation does not go out of hand.

The industrial sector has reported positive growth numbers and increased demand has seen the prices of raw materials being hiked too.Now, it is clear that the liquidity and the fiscal stimulus was instrumental in brining the industrial sector back to its feet.The question that remains to be asked is whether the industrial sector is ready to be on its own now.If it ain’t , then the RBI will find it extremely difficult to maintain a balance between a upward growth and a worrisome upswing in the inflation.

I wonder if there is a solution to this vicious circle.The industry and the regulatory body need to work in tandem to ensure that such extreme situations do not arise which demand compromise.We cannot afford a stagnant economy growth right and neither can we afford unabated inflation.

What’s your take on the situation.