Exclusive: Mid-sized Indian i-bank Equirus Capital is big on BFSI sector, says MD Ajay Garg

Ajay Garg, managing director, Equirus Capital

Investment banking and advisory services firm Equirus Capital, is set to launch its portfolio management services aimed at high net worth individuals, with an initial corpus of $7.5 million.

Founded in July 2007,  the full-service investment bank – offering advisory services on private equity, M&A, capital markets, and structured finance to mid-cap clients – claims to have executed over 100 transactions across capital raising and mergers and acquisitions.

In an interview with DEALSTREETASIA, Ajay Garg, founder and managing director of Equirus Capital, talks about the positive indicators for investment growth in India, and Equirus’ expansion plans.

Edited excerpts:

How do you view the investment climate now?

The environment is good right now and it’s getting better. We now have a far more proactive government than we ever had, that’s a very positive factor. Second, a lot of the projects which were unnecessarily getting stuck seem to be working now. Investments are now working out in a more decisive way. Government is also going to increase its spending in sectors like infrastructure, that will have a huge impact ( on economy).

Also, lower commodity and oil prices have had a (positive) impact on inflation, which has in turn affected interest rates. All those macro variables have played out well for how the investment and economic climate will look like.

Do you think the global economic slowdown has helped India to get more investors that were earlier keen on China?

Global factors have been confused since 2008-09, when one geography goes bad, another comes in. It’s a regular phenomenon. I don’t see too many changes in the global environment.

India will be impacted by several global factors, but at the same time India’s standalone story is looking good. Over a period of time we expect people to start looking at India independent of global equities or Asian equities; but that will happen only over a period of time.

There is distress in China, I see a lot of discussions happening not so many deals though.

What are the sectors that you think will be more attractive in the next few years?

The sector where we have been spending a lot of time and effort is – financial services.

It continues to do well because public sector banks continue to be a spot of bother, they can’t expand. So, you will see far more private banks, non-banking financial services, small banks etc becoming bigger.

It is a big sector for us. We do a lot of work in infrastructure, because India is talking about 8-9 per cent of GDP growth, which can only happen if infrastructure is laid out. So there will be more activity there.

Then there is technology, that continues to be a good secular story, and more deals should happen there. Then we look at consumer, as the consumption basket is increasing at a disproportionate level and that will continue for some time.

Then there is industrials. When manufacturing in China will slow down, manufacturing in India will grow, the two sectors in industrials where we see a lot of action is auto components and chemicals. I think that is an area to watch out for. Lastly there is life sciences.

These sectors historically have seen a lot of activity. Do you see any new sectors coming up?

Sectors will remain the same, but the activities that you saw historically and what you are seeing now is very different. For example in early 2000s there was a lot of action among pharma companies, then around 2008-13 there was a lot of action around hospitals, now there is action in diagnostics.

Sectors will remain the same but the drivers in each sector will keep changing. Like in financial services, earlier it was banks, then broking companies and NBFCs and housing finance, then small banks and micro finance. Flavours keep changing but the sectoral broad theme will remain the same.

How do you view real estate and infrastructure sectors in the next couple of years?

Infrastructure I am far more bullish on than real estate – given the fact that people are not expecting prices to correct a lot. When there is not much real estate appreciation, the investor demand will die down. So that will have it’s own cascading effect on real estate.

In real estate I’m far more bullish on affordable housing side, where there is not much investor participation. It is something that will shoot through the roof.

Do you think that investors are taking a lot more time to decide on investments?

If you’re focussing a lot on the e-commerce front then it’s a fair assessment. A lot of deals that were happening in the last two years were predominantly in the e-commerce space. That has a pre-pondering effect of that feeling. But, in other sectors it takes the same time as before, investors have become far more judicious. They are not trigger happy, because they have gone through a bad period in 2007-09, that’s not changed.

How was 2015-16 for Equirus? And how do you see 2016?

We ended the year with 21 transactions in 2015-16 financial year. We haven’t compiled the final numbers but there should have been a growth of 20-25 per cent over last year.

This year also we have had a very good start where we have closed a bunch of transactions. Recently there was Allygrow, where we helped them with two transactions in Germany and US. Then we closed the Agra-Jaipur highway deal for Madhucon. The growth this year could be better than 20-25 per cent.

Does Equirus have plans to get into the portfolio management space?

We have been in the equities broking business for a while, so we have built up a good research capability that allows us to keep identifying mid-caps. We have been doing this only for institutional investors and have been getting good response to that. We have almost 75 funds with whom we are working. Because of our research, there was a lot of request from HNIs – for a product to manage their money. We did not want to do this as a broking business, so our idea was to start with a small portfolio management activity with a small corpus and grow it as we grow.

Have you already launched it? What is the initial corpus you are looking at?

We have applied to SEBI for approval, when they give us a licence then we can start in the next 15 days or so. At this point we are looking at an initial corpus of Rs 50 crore (around $7.5 million).

Would you be interested in starting your own private equity fund?

No. Firstly, we don’t have any specific product right now which we can synergise to go into a PE fund. It is relevant to only talk about things which we will do in the next five years. And what we are doing right now, we don’t see ourselves doing anything like that in the next five years at least.

Are there any areas of interest for you to go in for inorganic expansion?

We are trying to build a wholesome investment bank. We are trying to build distribution with institutional investors, we are already have distribution with PE investors. With with planned HNI product we are also trying to build products with HNIs.

We have done acquisitions in the past like we bought Wizarth Advisors. We are open to those ideas. So whenever we come across any specific target, which allows us to achieve any of those objectives we will work on that, but nothing as of now.

Would be interested in establishing offices overseas?

For part of our business we would obviously do business outside, for example for research and broking business we would try to do something outside. These would be where the institutional clients are based – like Singapore and Hong Kong. We don’t need to necessarily do much outside work, for them anyway India is a focus market to invest in. So servicing them out of India, or maybe have people based in Singapore, Hong Kong or other geographies, is like an India desk wherever. That’s ongoing. As of now no plans.

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