Pharma, energy, infra M&As may soon get bank funding boost

THE RESERVE BANK of India’s (RBI) recent move to permit domestic lenders to finance acquisitions may open the door forthem insectors suchas pharmaceuticals & healthcare, energy, infrastructure, industri-als and renewables, said top investment banking sources.

- VIVEAT SUSAN PINTO, MAHESH NAYAK & RAGHAVENDRA KAMATH

These segments have seen consolidation in the last few years, data from EY show, with as many as three big M&A deals valued at $1-3 billion reported in these verticals in the first half of this calendar year.

India Inc’s total investment activity in the first half of this year touched $50 billion across M&Aand PE deals, 16% below the same period last year, but in line with the trend seen in H12023,when totalinvestment activity stood at $50.4 billion, according to EY data. M&A and PE deals in H12025 were nearly evenly split at $24 billion and $26 billion each. The previous two years show a sharper tilt towards PE deals. (See chart)

Experts say that sectors such as pharma, energyandinfra give banks the opportunity to get “hard collateral” (such as land, buildings and plants) against loans versus “soft collateral” or shares.Banks canalsofund upto 70% of the acquisition value, with 30% coming from the acquirer’s own equity.