Corporate finance plan for organisations needs to be formulated well

Corporate finance plan for organisations across industries needs to be formulated in a “well-structured and comprehensive manner,” says Jyoti Prakash Gadia, Managing Director at Resurgent India in an exclusive interaction with Bizz Buzz.

What are the key steps for organizations across industries to build a strong corporate finance plan that aligns with long-term growth objectives?

The corporate finance plan for organisations across industries needs to be formulated in a well-structured and comprehensive manner, taking into account the long-term growth objectives, and it involves systematic, gradual steps.

Each organisation, depending on the nature of the industry, requires an initial blueprint of the project. The technical, economic, and commercial viability of the project is assessed and documented by way of a detailed project report. The next step is to arrange for the promoter's fund and funding by commercial banks, NBFCs and other financial institutions by way of long-term loans for the creation of the project assets.

Depending upon the size of the project, more than one business group may join hands as co-sponsors to bring the initial funds as co-owners of the project.

Venture capital funds and private equity participants are also available in case the project is attractive and has Good potential for future growth.

Working capital funding is to be planned as the next step, which is available from both banks and NBFCs.

After the initial successful implementation and operations of the project, the organisation can plan for IPO and bring in public equity to further expand and grow. A step-by-step approach is therefore essential in every Corporate Finance Plan.

How is the Indian market addressing the challenges of financial restructuring, and what best practices are emerging to manage complex situations effectively?

As the Indian economy is on a development path and diversified industries are in operation, restructuring is also emerging as a challenge. Both corporate-level restructuring and project-level restructuring are

required depending upon the facts and circumstances of each case.

The Indian market is evolving and has exhibited resilience with the contribution of all stakeholders.

The government has brought out reforms with a proactive approach, creating an enabling environment for the resolution process as well as growth and expansion.

Although in the initial stages, the Insolvency and Bankruptcy Code is beset with delays and heavy amounts of haircut, the requisite changes are being brought out with suitable flexibility. IBC will ultimately prove to be a game-changer as a very important economic reform to set the tone for resolution and restructuring in the coming times 1!

Regulators are also playing a positive role in strengthening the ecosystem to encourage best practices to manage complex situations effectively. Greater participation by the financers through Assets Reconstruction Companies and Alternative Investment Funds is proving helpful to face the challenges of financial restructuring.

In mergers & acquisitions, what industry-wide factors are most critical to ensure strategic alignment between companies?

Mergers and acquisitions are an effective tool of expansion and diversified growth. The factors behind the strategic alignment between the companies will vary from industry to industry. However, some common factors will always be relevant.

Creation of new synergies to improve profitability is an essential factor for mergers and acquisitions.

The benefits of mergers can be in the shape of cost reduction, better utilisation of resources or improvement in productivity.

Operations of two entities under a common management can lead to improved efficiency.

All this, however, requires a deep assessment of the strengths and weaknesses of the two entities. A common approach with collaborative efforts is required, with common objectives in mind.

Scalability of production is another aspect which needs to be looked at to reap the benefits of economies of scale effectively through mergers and acquisitions to achieve the competitive edge.

Looking at major deals in India this year, what common factors have contributed to their successful closure?

The major deals in the mergers and acquisitions realm in the current period are in the domain of IT, the Financial Sector, the Pharma Industry, the healthcare sector and the hospitality sector.

The common factor in the case of IT is the possibility of the use of an AI technology platform for revenue integration and expansion into new geographical territories.

In the case of the financial sector, the availability of a running organisation at a competitive valuation, with a positive outlook of the sector, can be a determining factor.

In the case of the pharma sector, backwards and forward integration with more efficient use of resources and common usage of marketing tools is a possible consideration for a successful closure of the deal.

Acquisitions by very large corporations of smaller companies in similar industries which are operating efficiently is also a common factor for successful deals

How is the client acquisition landscape evolving for financial institutions, and what trends are driving this shift across the industry?

Client acquisition is an important aspect for financial institutions, which is evolving with the emergence of new entities and increased funding requirements.

The mechanism of client acquisition is diverse depending on the nature of clients. There is a very high level of competition in the acquisition of retail customers who have wider choices on the product differentiation level. Service quality and costing are also important in the acquisition of retail customers.

On the large corporate level, finance, the domain expertise of the institution and the credit risk appetite of the organisation are determining factors for the client acquisition policy and practices.

With the rapid evolution of global finance, how is the Indian financial sector keeping up with new developments to maintain competitiveness?

The Indian financial sector is at present robust and resilient enough to meet the emerging challenges and seize the opportunities with the rapid evolution of global finance.

The Indian banking sector is already adopting the best practices at par with global standards in matters of compliance to ensure long-term sustainability and competitiveness.

The utilisation of digital technology and acquisition of talent and skills to handle new products and services in the domain of direct finance, derivatives market, etc, has helped Indian entities to stay competitive. The regulatory mechanism is also being made more flexible for the Indian entities to play a significant role. New market instruments and avenues of finance, like InVits and REITs, have also been introduced in the Indian market.

What emerging trends, technologies, or regulatory shifts are likely to have the most significant impact on the future of finance in India?

The emerging trends and technologies that are relevant from the financial angle relate to the use of artificial intelligence and data analytics.

This will lead to a new set of products and services for the ever-demanding customer. Each institution will need to update itself and adapt itself to the changing trends to stay relevant.

Apart from speed, accuracy and new products, technology will also enable greater efficiency and operations cost reduction. Digitalisation and customisation will undergo a significant change.

The regulatory changes will be with regard to greater transparency and more effective recognition of stress and default cases with the implementation of the expected credit loss framework. The banks will need to have stronger risk management techniques and efficient operational tools.

Climate change issues will also lead to the financial sector functioning with an emphasis on green deposits and green bonds. Climate Finance Taxonomy is likely to be finalised soon by the Government of India, and future trends of funding will depend on the same to a very large extent.

EoM.