India offers some of the world’s best opportunities: Abel Scott, Houlihan Lokey

by Mapping Returns
Scott Adelson

Houlihan Lokey, a US company that specialises in corporate restructuring, is gradually looking into a post-covid investment scenario in India where promoters are willing to sell, downsize their companies, or collaborate with a financial sponsor to expand. According to Scott Adelson, co-president & global co-head, Corporate Finance, mid-sized Indian enterprises are becoming a little more active in their approach to the global capital pool as the insolvency and bankruptcy processes mature. Houlihan Lokey spoke with ET’s Reghu Balakrishnan & Indulal PM in an exclusive chat. Edited passages:

What do you think about the post-Covid investing environment?
One of the intriguing outcomes of COVID-19 was that it served as a reminder that risk does exist, and that danger does not necessarily occur where you expect it to. In the US and also in Europe, I have observed the expansion of private equity. They claimed before that we don’t need your American ways since we have family companies that are passed down from generation to generation. Private equity is currently expanding significantly across Europe. Here, I am beginning to observe the same phenomenon (in India). It’s still in its early stages.

What goals does Houlihan Lokey have for India?
Our attention is on the mid-cap market. Since mid-cap companies account for 98% of all worldwide M&A activity, we only wish to operate there.

Where does India rank among other markets in Houlihan Lokey’s analysis?
India currently offers some of the best prospects in the entire world. We’ve changed a lot as an organisation since the last time. India is a very significant market, as we’ve just discussed. We are actually discussing India as a region of the world that is expanding extremely quickly, as well as all the advantages that can be realised through cooperation and teamwork.

Do you think the NCLT procedures under IBC offer any opportunities?
It changes significantly after an asset is added to the IBC. Since there may be a foreign loan component, pre-IBC is where we can really provide value. That’s because Houlihan Lokey has excellent ties with all of the creditors on a global scale. Complex balance statements certainly offer room for expansion. There are various causes for why businesses fail. There is a need for people to decide who receives what when they have intricate balance sheets, and the answer is not always obvious. In this, we genuinely lead the globe.

Which are the areas that HL sees a larger investor interest?
The entire chain in manufacturing and old economy sectors provides a major opportunity. A lot of these balance sheets are over-leveraged that need to be relooked. We help promoters think through debt as an option for finance. In India (for everyone) everything is equity. But debt is actually a pretty fundamental tool for what you can do (for acquisitions).

Which sectors that you think will be of more focus in coming years?
We look at it from a five-year lens. For instance, to support 5G rollout, we will need massive infrastructure investments across telecom, towers, software, networks. We feel telecom is a massive sunrise sector in India. We are seeing fantastic brands come up, whether it is healthcare supplements or consumer durables. Technology remains the mainstay for us. whether they are consumer durables or dietary supplements. Technology is still our mainstay.

The Asia fund of private equity firms is investing more money in India. What do you think of the trend? Is it enduring?
I’m more likely to pay attention to long-term patterns. The more developed and, in some cases, even declining economies, like those in the US and Europe, are helping the faster-growing ones. India is one of these important markets as we start to notice a growing shift of investment to the faster growing economies.

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