Looking at the spate of outbound bids that India Inc is making for assets abroad, don’t be surprised that the time horizon shrinks.
The first 3 quarters this year have seen 115 acquisitions by Indian firms overseas
MUMBAI: “In three years, Indian outbound foreign direct investment (FDI) would exceed its inward FDI,” Adi Godrej, chairman, Godrej group, had said in a mergers and acquisitions (M&A) seminar organised by a B-school recently. Looking at the spate of outbound bids that India Inc is making for assets abroad, don’t be surprised that the time horizon shrinks.
According to Dealogic, a firm tracking inbound and outbound M&A deals, in 2000, valuation of outbound deals was about $1 billion, against $6 billion for inbound deals.
In the first nine months of the year, the gap has narrowed with inbound deals at a little under $8.5 billion, and outbound at $7.4 billion.
“These are the best of times for an M&A student. During our times, we would be thrilled if half a dozen M&A deals happened in a whole year,” Rashesh Shah, chief executive of Edelweiss Capital, had said. Today, Shah’s hands are full, advising clients as they churn assets and expand their businesses and exit non-core ones.
From 20-25 deals annually about a decade back, liberlisation policies of the has now resulted in over 340 deals signed last calendar, involving a whopping $18.2 billion.
Of this, cross-border transactions (inward and outbound) numbered 192, valued at $10 billion. Last year, the Tata Group alone spent $1 billion in acquiring overseas assets.
According to The Economist, the first three quarters of the year has already resulted in 115 acquisitions by Indian firms overseas, with a total value of $7.4 billion.
A decade after it last pumped up capacity on domestic soil, India Inc is now looking at acquiring capacities and capabilities abroad, many of which are coming cheap due to depressed market conditions.
And the trend is secular, with manufacturers and services across sectors lapping up assets abroad.
From pharma to information technology to fast moving consumer goods, none seem to have escaped the trend.
Bharat Forge has acquired six companies since 2004 in four countries to emerge as the world’s second-largest forger. Wipro has acquired three overseas companies this year, Ranbaxy has bought two.
Wind energy major Suzlon Energy has bought a Belgium wind turbine gearbox manufacturer for Rs 2,511 crore. In July, Crompton Greaves acquired the electrical business of Hungary’s Ganz Transelektro Villamossagi Zrt (GTV) and Transverticum kft (TV).
Last month Mahindra & Mahindra made the biggest overseas acquisition in auto component space by acquiring a majority stake in German forging company Jeco Holding AG. And the party is yet to peak. There are several deals in the pipeline, which could fructify over the next couple of months. Almost all major companies are said to be considering some or the other acquisition offer.
A Videocon-led consortium has emerged as the preferred bidder for stressed South Korean Daewoo Electronics. Godrej is in talks for FMCG buyouts in China. Mahindra & Mahindra is also said to be close to signing another deal to further strengthen its auto component business.
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