Kotak eyes M&A funding opportunity

By Narayanan Somasundaram

MUMBAI (Reuters) - Kotak Mahindra Capital Co, the former Indian partner of Goldman Sachs, expects M&A funding to emerge as an opportunity in a market where its global peers are shying away from such deals amid the global crisis.

In India, M&A talks have been back in full swing over the last two months, after a six-month lull, but availability of funds is a constraint, the firm's managing director, Falguni Nayar, told Reuters in an interview on Monday.

"There will be more funding opportunities emerging. One would tend to use debt funding in most situations," she said.

Global investment banks underwrote huge debt to help their clients close leveraged M&A transactions in the boom years between 2005 and early 2008.

However, the worst global financial crisis in 80 years has forced banks to abandon the model as they set about cleaning up their books, opening the doors for regional players like Kotak.

The firm, a unit of private-sector lender Kotak Mahindra Bank, has this month arranged the debt for outsourcer Tech Mahindra's 550 million-plus deal for a controlling stake in fraud-hit Satyam Computer Services.

"We won't do a billion dollar funding and keep it on our books," Nayar said, adding the company would either sell the loan to other investors or use its relationships to arrange debt and charge the clients a fee.

She said the worst was behind Indian deal flows and expected opportunities to arise in distressed asset restructuring, convertible buybacks and infrastructure funding and advisory.