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BW Businessworld

Of Money & Buying Spree

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Investment banking activity is a fairly good indicator of the corporate mood in the country. And going by the amount of business that is coming the way of investment bankers, Indian business houses have shrugged off all the gloom and doom of the past couple of years and they are extremely optimistic of the future.

Consider this: equity placements — through initial public offerings  and the qualified institutional placements route or just secondary floats — are providing brisk business. Meanwhile, companies that were only interested in restructuring debt last year have started raising fresh debt. And finally, the biggest indicator of all — merger and acquisition (M&A) activity — has touched an all-time high.

Have the lessons of the last boom and the financial meltdown that followed been forgotten? Not really, says associate editor Raghu Mohan, who has put together our cover story this issue. All the investment bankers he talked to agreed on one point — there might be record activity in the market currently, but companies are also being more cautious than they were before the meltdown.

For example, while the volume of M&A activity has hit record highs, the individual deals are generally much smaller. Apart from the odd spectacular acquisition — the Bharti-Zain deal, for instance — most deals currently taking place involve smaller acquisition targets and much lower financial risks. Similarly, companies are far more conservative in raising debt than they were earlier. There are other significant differences, too. Read about them on page 46 and also about the investment bankers who are brokering these deals.

Meanwhile, interest in shale gas is mounting. The champions of shale gas say that it has the potential to change the energy economy of the world. They also feel that if the Indian fields are properly explored, we will find record deposits of shale gas in the country.

However, there are two hiccups to exploiting the potential of shale gas immediately. First, India doesn't even have a formal policy of shale gas exploration. More importantly, the existing technology for shale gas extraction is quite expensive. Currently, the market prices for gas are lower than the cost of extracting shale gas. Read about it on page 32

(This story was published in Businessworld Issue Dated 04-10-2010)