Alliance News: 15/2/10

INDIA INC TO SPREAD WINGS VIA TAKEOVERS
Ranjana Kaushal, New Delhi, February 15, 2010
Mail Today

At a time when the western world is looking at the growth in the emerging economies as a bailout from the recession, Indian companies have been aggressively pursuing their outbound merger and acquisition (M& A) deals. So much so that industry veterans predict domestic multi- national companies (MNCs) could gain prominent position in global landscape by 2015.

A study, conducted by Grant Thornton and Confederation of Indian Industry (CII), points out that by 2015, one third of the world’s top- 500 companies will be from emerging markets.

Said D. S. Brar, chairman, GVK Biosciences, “ In Asia, the gross domestic product (GDP) strength is shifting to India and China and I see this as a huge opportunity for companies.

This is a good time for companies to buy assets in developed markets. The assets firstly come at a low price and have huge technical leg- up. Companies can use these two advantages for expansion.” According to the study, there will be a graded shift of wealth and economic power from the developed to the emerging nations over the next two decades. The tilt has been reflecting in the figures of outbound investments from India starting 2006 when the figure of outbound investments stood at $ 9.1 billion compared to the inbound investments of $ 5.4 billion.

In 2008, the figures were $ 32 billion and $ 15 billion respectively. By the end of the decade, the share of emerging markets will increase to 40- 50 per cent of the global economy and markets, the CII- Grant Thornton report added.

In 2009, there were as many as 156 cross- border deals worth $ 5.26 billion compared to 174 domestic deals with an additional value of $ 6.70 billion. Cross- border deals account for 44 per cent of the total M& A deal volume and 47 per cent of the value in 2009.

Brar added, “ Sectors such as pharma, IT and automobiles will be front runner as far as outbound deals are concerned.

However, sectors namely hospitality and steel also have a huge potential.” The first half of 2009 saw 64 cross- border deals amounting to $ 1.42 billion while second half recorded nearly two and half times the value of the first half garnering $ 3.8 billion through 92 deals. The average value of inbound deal was $ 52.50 million and for outbound deals the figure was $ 16.78 million.