Cash-rich Indian firms on global shopping spree

Tuesday, 24 August 2004, 07:00 Hrs
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NEW DELHI: Helped by a huge cash-pile and fuelled by a passion to go global, once-insular India Inc. has started expanding overseas with a spate of acquisitions in recent months.

If the $283-million buyout of a part of Singapore's NatSteel by the Tatas and Reliance's takeover of Germany's Trevira for $98 million is any hint, 2004 may go down as a year that is putting Indian's global shopping spree on top gear.

From diversified businesses and pharmaceutical majors to technology companies and infrastructure conglomerates, all have been caught by today's mantra of reaching global scales, sending them scouting overseas for potential takeovers.

And this time the acquisition drive is not restricted to traditional markets like the US and Britain alone - companies are going to markets as diverse as Australia, Romania, Germany, Angola, the Philippines, South Korea and Bosnia.

According to India Advisory Partners, a London-based database on mergers and acquisitions, corporate India struck 49 overseas buyout deals last year, totalling $1.8 billion.

But in the first six months of this year alone, a total of 24 deals worth $846 million have been finalised, excluding the buyouts by the Tatas and the Reliance group, and several big-ticket announcements that are on the anvil.

In 2002, Indian companies had struck 28 buyout deals overseas for an investment of $209 million.

"Most of the Indian companies are now looking for an international presence in a major way after having established a domestic presence," said noted corporate sector analyst D.H. Pai Panandiker.

"Indian companies were sitting on a huge cash pile for sometime now. Despite this very few firms dared to go out and buy firms overseas due to the depressed market conditions back home and geopolitical uncertainties overseas.

"All that has changed now for the better and corporate India is finding it the most appropriate time to expand their reach overseas," Panandiker told IANS.

Acquisitions have now become an important driver in the evolution of the Indian multi-national companies, who not too long ago shied away from global competition.

Powered by sharply higher farm output, the Indian economy grew by an impressive 8.2 percent in the fiscal ended March 31, 2004, making the country of over one billion people the best performing economy globally after China.

"There are many factors that are driving the acquisition spree by Indian companies in the current calendar year," said a senior analyst with an independent credit rating firm.

"First is a sharp pick up in the domestic industrial activity resulting in a significant growth in earnings and the second reason is changing mindsets of the Indian company managements," said the analyst.

"With increased productivity and expanding export markets, Indian managers are now thinking global. They are now thinking in terms of global competitiveness, global ranks and global market shares."

Analysts say the most interesting aspect of the recent acquisition binge is that IT and new economy companies are not the only ones behind the drive.

Traditional firms representing sectors like consumer goods, hospitality, engineering goods, textile, automobile, petrochemicals and entertainment are also fast shedding their local focus to go global through buyouts.

Among the big ticket acquisitions in the recent months is the Tata Steel's takeover of steel business interests of NatSteel in Singapore, China, Malaysia, Thailand, Australia, Vietnam and the Philippines.

Tata Steel's, which is a part of the conglomerate Tata Group that has diverse business interests, $486 million purchase of NatSteel is the third major global acquisition by the business house in recent years.

"The acquisition of the steel business of NatSteel is an important step in Tata Steel's plans to build a global business," said B. Muthuraman, managing director of Tata Steel, India's largest private sector steel maker.

Reliance Industries, India's largest private company, also finalised the takeover of a leading polyester producer in Germany with the European Commission giving its green signal in the current month.

Reliance, one of the largest polyester fibre and yarn players in the world, had earlier inked the Trevira sale agreement in Basel, Switzerland on June 23.

Earlier this year, ONGC Videsh, a subsidiary of state-run energy giant Oil and Natural Gas Corp, scripted one of the largest acquisition deals by acquiring a 50 percent stake in an offshore oil block in Angola for $602 million.

"There are many companies in India now in a host of industrial sectors that have global management mindset, significant exports, and huge cash reserves," said analyst Panandiker.

"These companies have finally begun to emerge from their shells and make their footprints in the global market. And the process will only get strengthened in the years ahead in a booming economy."

Source: IANS
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