India's FDI outflow to exceed inflow in 2007-08
Friday, 16 March 2007, 05:00 Hrs
New Delhi: As a confident India Inc has started bidding for more and bigger deals abroad, in 2007-08 overseas investments from India will be around $15 billion - surpassing foreign direct investment (FDI) inflows in the country, says a study. The bulk of outward FDI flow will be driven mainly by India's booming manufacturing sector, said the 'Study on FDI Outflow & Role of Manufacturing in the Mergers & Acquisitions Front, 2007', by the Associated Chambers of Commerce and Industry (Assocham). Indian companies' preferred investment destinations are the European countries and the US, as also Africa taking advantage of its cost competitiveness. Sectors such as pharma and automobiles will give a major thrust to the FDI outflow, though IT will continue to dominate the scene, said the report released Friday. "Riding on strong balance sheets, good credit ratings and confidence shown by global business community, Indian manufacturing is leading India Inc.'s global quest," said Venugopal Dhoot, president, Assocham. The main factors fuelling the growing hunger for mergers and acquisitions (M&A) among Indian companies are huge fund supply, globally competitive business practices and favorable regulatory environment, besides higher margins, revenue, volumes and growth prospects. "The number of outbound M&A deals has increased sharply over the past six years from about 37 in 2001 to more than 170 in 2006. The transactions gathered tremendous momentum in 2005," the report said. "The total number of deals actually doubled in 2005 from 2004 to reach a figure of close to 150 from 70 in previous year." According to Assocham, the Indian conglomerates that are upbeat on inorganic growth are the Tata group, Bharat Forge, Ranbaxy, ONGC, Infosys and Wipro. "The sectors attracting investments by Corporate India include a whole gamut of sectors - metal, pharmaceuticals, industrial goods, automotive components, beverages, cosmetics and energy in manufacturing; and mobile communications, software and financial services in services," the report said. Talking about specific examples, the study noted: "The Apollo Group of Hospitals may strike cross border deals to expand its global footprint through strategic partners with some of the local hospital chains overseas while pursuing mergers and acquisitions in the US and Europe. "Nicholas Piramal India Ltd plans to invest $50 million over a three-year period in its plants in the UK and India," it added. In the energy sector, India's Suzlon Energy Limited, the world's fifth largest wind turbine manufacturer, has offered $1.3 billion for Germany's REpower.