Opinion
On Back of Robust Growth,
India Inc Spreads Wings Overseas By Arvind Padmanabhan
New Delhi
India's economy is set to turn this year on the wings of an enviable 9
percent growth with the government keeping its faith with reforms
despite leftwing opposition and a takeover-hungry corporate India
distinguishing itself with record mergers and acquisitions valued at
over $65 billion.
And with the country's agriculture sector, that had been a major drag on
India's overall economic performance earlier, starting to look up,
policy-makers led by Prime Minister Manmohan Singh feel the country can
step up its growth further.
"It is possible that with correct set of policies and dedicated effort
by both the central and state governments, we will not only maintain
this momentum of high growth but may be able to raise it to 10 percent,"
Manmohan Singh said.
"Our economy has demonstrated resilience in meeting the challenges posed
by globalisation. In the last two decades, our industry, both large and
small, has also restructured and become globally competitive," he said
here last week.
Manmohan Singh's reference was to India emerging as net exporter of
investments, led by the Tata group, India's largest business house, that
paid $11.1 billion to acquire Anglo-Dutch steel maker Corus, even though
the country itself sought large doses of overseas capital.
In fact, a study by international consultants Grant Thornton estimated
that the total value of private equity and mergers and acquisition deals
in India during 2007 was $68.32 billion, up 143 over last year's $28.16
billion.
The average merger and acquisition deal size was close to $77 million
and that for private equity was $44 million in 2007, the consultancy
said in its annual "Deal Tracker" report that studies the global merger
and acquisition market.
The total number of mergers and acquisitions alone stood at 661 in 2007,
with a total value of $51.17 billion, against 480 deals with a value of
$20.30 billion last year.
"Steel and telecom sectors were the clear leaders as far as sectoral
values were concerned," said C.G. Srividya, a partner at the India arm
of Grant Thornton, reflecting on which areas attracted the maximum
merger deals.
"The two (steel and telecom) garnered $14.9 billion and $11.3 billion
worth of deals, respectively. Together, they accounted for as much as 50
percent of the total mergers and acquisition deal value during 2007,"
she added.
"The large volume of outbound deals is indicative of the current mindset
of many Indian companies - grow, acquire and utilise debt facilities to
the full," said Ian Gomes, chairman of KPMG's new and emerging markets
practice.
"The hunted are fast becoming the hunters, with increasing numbers of
companies in developing nations casting their eyes far beyond their own
borders, putting their stamp on the international acquisition trail," he
added.
A study by the consultancy said of the four major emerging economies -
Brazil, Russia, India and China (BRIC) - India recorded the largest
number of merger deals in 2007.
From large business groups such as the Tatas, Essars and the Aditya
Vikram Birla group to mid-sized and smaller firms with turnovers of less
than $1 million, an unprecedented effort was made for global integration
and economies of scale.
"It is with much enthusiasm that I underscore - Indian industry has
grown wings. Globalisation has given a new meaning and dimension to
India Inc," Commerce Minister Kamal Nath said, while releasing a book on
Indian multinationals.
"Many Indian firms have slowly and surely embarked on the global path,
leading to the emergence of Indian multinationals. Indian industry has
crossed domestic frontiers and established a credible presence in
markets abroad."
In fact, the flow of money for corporate sector was also at a record
high, with Ernst and Young estimating the figure at $8.3 billion,
through 95 initial public offerings in 2007 to rank India seventh and
fifth in the world, respectively.
Even inflows from foreign institutional investors (FIIs) in the Indian
equities markets touched a record level of $16.995 billion during 2007,
as against $7.993 billion last year, latest data with the markets
regulator showed.
Little wonder, the United Nations Conference on Trade and Development (Unctad),
in its World Investment Report, 2007, rated India the second hottest
destination for foreign investment, next to China and ahead of Russia
and Brazil.
The year began with the Tata group announcing the biggest-ever takeover
of an overseas firm by an Indian company when Tata Steel acquired Corus
- a company several times larger in terms of revenues.
This deal was ranked among 10 best this year by Time magazine. "Although
India's technology prowess in the outsourced world grabs the headlines,
there is no more powerful symbol of India Inc.'s rise than this one," it
said.
"Ah, the delicious irony, as the Tata family conglomerate, India's steel
giant, buys the Anglo-Dutch firm that includes the remnants of British
Steel at one time, a symbol of Britain's imperial might," the magazine
noted.
In April, another Tata company in the power sector bought significant
stakes in two Indonesian groups, PT Kaltim Prima Coal and PT Arutmin
Indonesia, for $1.1 billion, while Essars acquired Canadian firm Algoma
Steel for $1.55 billion.
In May, Vijay Mallya-led United Spirits bought Scotch whisky distiller
Whyte and Mackay for $1.18 billion, followed by an announcement that
Suzlon Energy has taken over the German firm Repower Systems for $1.7
billion.
Similarly, Hindalco paid $6 billion that to acquire Canadian aluminium
products manufacturer Novelis, and as the year was drawing to a close
the Tata group had emerged frontrunners in acquiring two British brands
- Jaguar and Land Rover.
Looking ahead, some global agencies like Unctad predict India's
emergence as a major player in the foreign investment market, with
domestic companies wanting to access new technology, become competitive
and build strong global positions.
"China and India are beginning to challenge the dominance of the Asian
newly industrialising economies - Hong Kong, Republic of Korea,
Singapore and Taiwan Province of China - as main sources for foreign
direct investment."
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