Cash-rich Indian corporates go on acquisition binge globally

Monday, 17 November 2003, 08:00 Hrs
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NEW DELHI: The year 2003 may just go down as a period when Indian corporate houses went on an unprecedented overseas shopping spree to expand market reach and increase brand visibility across the globe.

Enthused by a sharp pick in product demand triggered by a booming economy back home, Indian companies are going all out to acquire firms representing a wide spectrum of industrial sectors.

And this time the acquisition drive is not restricted to the traditional shopping markets like the U.S. and Britain.

The companies are going to as diverse markets as Romania, the Philippines, South Korea and Bosnia.

"Indian companies were sitting on a huge cash pile for sometime now," said noted corporate sector analyst D.H. Pai Panandiker.

"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," Panandiker told IANS.

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

"Acquisitions have now become an important driver in the evolution of the Indian multi-national companies."

Indian companies reportedly acquired 30 overseas firms in the first seven months of the current fiscal, with a total fund outgo of nearly $600 million.

"There are many factors that are driving the acquisition spree in the current calendar year," said a senior analyst with independent credit rating firm CRISIL India Ltd.

"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 who didn't want to be named.

"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."

According to a CRISIL study, the liquid assets build up of Indian companies have growth from slightly less than 20 billion in the fiscal year 2000-01 to 60 billion in the current fiscal year.

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.

"Acquisitions are a very natural way of progression for any company. It not only helps in expanding market in new geographies but also gives an competitive edge," says Sameer Banerjee, director (marketing) of Jindal Polyester.

Jindal Polyster, a $96 million company that makes polyester resin, polyester film and polyester yarn, last month acquired a French polyester producer Rexor from a consortium of banks by paying 10 million euros.

"The acquisition will strengthen our foothold in Europe where we are already selling nearly 50 percent of our total production. We are also looking for buying opportunities in the U.S., China and Japan," adds Banerjee.

Among the big ticket acquisitions in the recent months include the buying by Reliance Gateway Net, a 100 percent subsidiary of Reliance Infocomm, of global undersea telecommunications operator FLAG Telecom Group.

The all-cash deal was valued at 9.50 billion. With access to over 50,000 km of undersea fibre optic network, and two hubs in London and the Middle East, the deal catapults Reliance into the big telecom league internationally.

Tata Motors, India's largest truck maker and third-largest carmaker, has also taken a significant step towards becoming a global player by agreeing to buy South Korea's Daewoo Commercial Vehicle.

Mumbai-based Tata Motors has signed a binding Memorandum of Understanding with Daewoo Commercial Vehicle Company, the truck-making arm of Daewoo, the failed South Korean conglomerate.

Ranbaxy Laboratories, the country's largest drug maker buy sales, has reportedly acquired the French generic drug company RPG Aventis last month for about $70 million, marking a leap in its ambitions of becoming a global generics player.

Home-grown consumer goods major Dabur India in September announced the acquisition of Britain-based cosmetics firm Redrock Ltd. after obtaining all the requisite approvals of regulatory authorities.

"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."

The Indian government last week raised its economy growth forecast for the year ending March 2004 to more than seven percent from six percent. Asia's third-biggest economy grew 4.3 percent in 2002-03.

Source: IANS
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