With two half-billion dollar deals announced in the last two months, the country has clearly arrived in the global mergers and acquisitions stage like never before.
NEW DELHI/MUMBAI: Corporate India is bidding buy-buy to timidity. With two half-billion dollar deals announced in the last two months — Dr Reddy Labs’ purchase of German drug firm Betapharm for $570 million and Suzlon’s deal to buy a Belgian wind turbine machinery maker for $567 million — the country has clearly arrived in the global mergers and acquisitions stage like never before.
“The biggest change that corporate India has witnessed is a mindset change,” says N Srinivasan, director-general, Confederation of Indian Industry (CII).
Even as Indian politicians fuss about whether to allow foreign companies to invest in this sector or that, Indian companies are using the relative freedom of foreign shores to make major investments. In calendar 2005, corporate India announced deals valued at more than $4.4 billion, according to Bloomberg data. But this year, in the first three months alone, there have been announcements of more than $1.6 billion in global acquisitions.
And you ain’t seen anything yet. Says Alan Rosling, executive director of Tata Sons, the Tata group’s key holding company: “So far, what we have seen are a few billion dollars of deals. It’s nothing. What we a likely to see in the future would be bigger and bigger deals. It’s the natural progression of Indian businesses coming of age.”
Ranbaxy Laboratories probably created a record of sorts when it announced three acquisitions in three days last week. On Wednesday, it bought up Romania’s largest generic drugs firm, Terapia, for $324 million. Before that, it acquired GlaxoSmithKline’s Italian unit for an undisclosed sum; it concluded a hat-trick on Thursday by buying up Ethimed, Belgium’s 10th largest generic drugs company.
Till the late 1990s, outward foreign direct investment (FDI) by Indian companies was a small fraction of investment coming into India. Not any more. In 2002-03 and 2003-04, outward FDI accounted for over 55 per cent of inward FDI. That is, for every $100 coming in, $55 was going out. But economists aren’t worried about this. Because what goes out often comes back in as dividends, royalties, and payments for imports from India.
Big 5 M&A deals
- Dr Reddy’s targets Betapharm, Germany for $570 mn
- Suzlon Energy targets Eve Holdings, Belgium for $567 mn
- Tata Steel targets Millenium Steel, Thailand for $395 mn
- Ranbaxy targets Terapia, Romania for $ 324 mn
- Videocon targets Thomson tube business (various countries) for $290 mn
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