India Inc. now game for billion $ deals

By agencies   |   Tuesday, 31 May 2005, 07:00 Hrs
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NEW DELHI: For years, the image of an elephant feeding on grass was the most incongruous picture of the Indian economy when it came to the size of business deals.

While multi-million dollar deals were coming dime a dozen, mega-sized action was missing, or at best, rare. But now India Inc is moving on to the next phase: Billion dollar games, where the stakes are much higher, Business daily Economic Times reports.

Whether it is the $7 billion aircrafts deal of Air-India, proposed multi-billion dollar greenfield investments in the steel sector by Posco, Ispat International, or by home-grown steel magnates, or big budget acquisitions in both domestic market as well as the global arena or debt finance and international equity deals, it’s all happening here.

As a corollary, the participants of such mega bucks game are scripting biggest ever deals in their spheres. The biggest of them all is the $7 billion Air-India and Boeing deal, which witnessed hectic lobbying by the European and American aircraft majors. It also marked one of the most fiercely fought diplomatic battle.

Yet another in line is the $2 billion Indian Airlines aircraft deal with Airbus, which is long awaited but given that action is hotting up in the domestic aviation sector, it is expected to be expedited.

ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC) has recently bid $1.4 billion for acquiring Canadian firm Encana’s stake in a cluster of oilfields in Ecuador.

In the telecom sector, the enterprise value of BPL Mobile is being pegged in the region of $1 billion with Essar believed to be among the front runners in buying out the Mumbai based cellular service provider. If it happens, it would be one of the biggest such inorganic expansion deals in the booming telecom market in the country.

However, when it comes to big budget M&As, nothing beats the Basell deal, wherein Purnendu Chatterjee (of The Chatterjee Group, a private investment firm) and a group of New York based private funds are set to acquire Basell, the world’s largest producer of polypropylene.

The $5.7-billion deal, if it manages to overcome the question marks over its financing, would be the biggest takeover by any Indian entity abroad, beating even the much publicized $4.5 billion that Laxmi Mittal forked out for acquiring the International Steel Group of Ohio.

Besides, there are the steel giants proposing big budget greenfield investments in the country in eastern India. The global steel magnate L N Mittal himself has proposed a $5.5 billion greenfield plant at Jharkhand and there is the controversial and much-debated $12 billion proposal by South Korean steel major Posco for Orissa. Even domestic steel majors are now into billion-dollar investment league.

SAIL’s proposed $5.7 billion capacity expansion, $5.3 billion expansion of Tisco, and Jindal Stainless pitching in with an $1.8 billion expansion program are in the offing.

BHP Billiton, world’s largest mining company, has also disclosed plans to pump in $1 billion for acquiring bauxite mines and for setting up an aluminum plant in Orissa. Russian Aluminum (Rusal) is also planning a $1 billion alumina plant in India.

The Blackstone Group, a private investment and advisory firm, recently announced that it has allocated $1 billion for India. In the debt side, there is ONGC’s proposed overseas debt scoop of $3 billion, one of the biggest commercial borrowings ever by an Indian company, which the oil and gas giant is expected to use for part-financing acquisitions.

Infosys’s American Depository Receipts (ADR) issue- the largest international equity offering from India-where the company has converted about $1 billion worth of shares listed in India into ADRs trading on the Nasdaq.

While there is a still long way to go to touch global benchmarks which works on scales like the $80.1 billion stock transaction between Royal Dutch Petroleum and Shell Transport & Trading or Sanofi’s $65.7 billion acquisition of drug rival Aventis or JP Morgan’s $58.8 billion acquisition of Ohio-based Bank One sometime back, the first signs of such a development is visible now, the report said.

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