Outdated risk, renewed opportunities: A case for acquisition financing
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India, having drawn over USD 1 trn in FDI and led Asia’s IPO surge, stands ready to define a new growth story. But no nation accelerates on global highways with domestic wheels held back. Restrictions born of a bygone era meant for an unsteady past must now yield to a resilient, transparent, and well-regulated India. After the security market debacle that spanned the 90s and early 2000s, regulators intervened and restricted banks from financing sensitive sectors like stock purchases, real estate, gems & jewelry, etc. effectively not permitting banks to finance equity beyond a certain limit. These strictures were placed considering market volatility and lack of institutional capacity with banks in risk measuring and management. Acquisition financing refers to debt funding used specifically to acquire equity. It is essentially a loan taken to buy another company. Globally, this is a common tool in M&A transactions, often forming par...