Michael Carapeit, ED and global head of Macquarie Capital, is no stranger to India. Of Armenian descent, Mr Carapeit was born in Kolkata and studied in the city till 1974, after which his family migrated to Australia. His message to Indian companies looking to expand overseas is: dominate your home market before setting your sights abroad. In an interview with ET, Mr Carapeit says that the second half of 2010 will be much better for equity markets globally. Excerpts:
Is the worst of the European debt crisis over? Do you see some more unpleasant surprises?
We have a pretty good view of what the issues are, but the actual solutions are country and organisation-specific. From our point of view, we broadly see the economies moving into a positive territory. There will always be pain and there will always will be good times, regardless of market sentiment.
From an investment banking point of view, there are lots of M&A transactions happening right now, be it in the financial institution space or governments privatising infrastructure and utilities. A falling euro has seen many manufacturing firms across Europe becoming very competitive on a pricing basis than they would have been 18 months ago.
In Asia, we have a high single-digit growth and the actual ability to now source quality European equipment far more cheaply. It is a much more compelling proposition, and as a result, we see the manufacturing sector in countries, such as Germany, doing quite well. Financial services are going to be a challenge for a while, and obviously, the sovereign debt problem is there for everybody to see.
Do you see more M&As happening from Asia into Europe?
Yes, much more. We have seen Indian companies do this progressively over time. Larger players have had international operations for a while. The strategic issue for many companies is when you have such strong domestic demand where do you allocate your scarce capital.
In my opinion, unless you dominate your home market, it’s pretty hard offshore. I see many companies, very often, say that well, the domestic market is very competitive, so let me try elsewhere. It is quite rare that a niche player in the home market can go offshore and suddenly become successful.
How do you see India faring relative to other emerging markets?
Very well, actually. The vast majority of the Indian economy is driven on a domestic basis. While not totally immune to what is happening around the world, it is a much more domestic demand-driven story rather than an international story for most of your companies.
Mega companies that have operations around the world will have to take these changes into account. The bulk of the Indian economy and majority of the Indian companies are going to see a 7-8% growth this year and if you are linked to GDP that is quite a good place to be to what is happening elsewhere.
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