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Indian companies racing ahead
By agencies
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Thursday, 13 July 2006, 19:30 IST
NEW DELHI: India seems to be everywhere. With a potential to emerge as the leader in outward FDI among other BRIC economies, Indian companies are on an acquiring spree.
The Financial Express reported that the month of June saw a closure of 10 cross-border deals with a total transaction value of $1.5 billion. January to June witnessed 76 deals worth $5.2 billion. India also ranked at number 54 among the 132 economies ranked on the basis of their outward FDI performance index by UNCTAD in 2004.
Recent studies have shown that Software/BPO and pharma/healthcare sectors, with a share of 33.6 percent and 20.5 percent respectively, account for more than half the overseas acquisitions. Global investment companies are now banking on Indian companies more as buyers than as sellers, said the paper. Indias largest acquisitions have been reported to be in Europe at about 40 percent and North America at about 34 percent.
India has also emerged as the third largest investor in UK with the Tata Group emerging as the largest Indian investor there holding 16 companies and an employee strength of 3,000.
Financial Express also reported that in the automotive sector Tata Motors, Mahindra & Mahindra and Bharat Forge have adopted the M&A route to become multinationals. Bharat Forge is said to receive a significant proportion of its revenue from overseas acquisitions.
Asian Paints, Tata Chemicals, United Phosphorus and GHCL have made acquisitions in Egypt, Romania, UK and U.S. in the chemical industry sector, while Tata Tea, Daburb and Godrej feature in the consumer sector. Dr. Reddys, ran-baxym Wockhardt, Nicholas Piramal, Jubiliant and Sun Pharma have made a mark in the health care sector.
With Tata Coffee acquiring U.S. based Eight OClock, a company two and a half times its size, Indian companies have embarked on acquiring much larger global enterprises as well.
A survey by Grant Thornton India suggested that the Indian corporate world is edging towards aggressive growth through the M&A route. Of the 200 companies surveyed, nearly 81 percent were exploring the M&A growth option while 30 percent of the companies had actually taken the M&A in the past. This points the arrow towards a significant surge in M&A activity in the coming years.
Counting on the percentage of gross fixed capital formation (GFCF), Indias FDI outflows have shown a steady increase as opposed to other BRIC economies, said the Financial Express. It rose from 0.01 percent in 1983-85 to 1 percent in 2001-03. China recorded a 0.3 percent in 1983-85 and grew to 1.3 percent in 1992-95 and again fell to 0.9 percent in 2001-03. Brazil recorded 0.3 percent in 1983-85, 0.7 percent in 1992-95 and feel by 5 points to 0.2 percent in 2001-03.