Mergers & Acquisitions: The next big Indian deal

Posted on April 18, 2010

Utkarsh Chaturvedi:

A few weeks ago, the Indian communication behemoth Bharti in a historical deal with Kuwait’s Zain, bought control of its African operations. This deal is said to spearhead India’s corporate development into the Dark Continent. This proves that though there may be several hiccups but Indian companies are not shy of Mergers and acquisitions (M&As) abroad.

Many Indian companies are looking beyond the local markets to garner a global audience. There have been instances of big M&As in the past. In January 2007, Tata steel purchased a 100% stake in Corus group, making the deal the largest takeover of a foreign firm by any Indian firm. Again in February 2007, Hindalco industries and the Aditya Birla group acquired a Canadian company Novelis Inc. in a $6 billion deal. In the telecom sector, NTT Docomo bought 26 percent stake in Tata Teleservices in 2008. Public sector companies aren’t far behind, ONGC bought control of Imperial energy Plc in 2009. Thus, Indian firms have registered growth in nearly every major sector, be it power, communication, pharma or automobiles. This strong profile of Indian companies is increasing by the day.

M&A activity in January 2010 alone rose by a whopping 126% over last year’s values. In fact, within first 45 days in this year, deals worth $14 billion have been announced. This will bring in the development in mergers, takeovers by Indian firms as in 2009, corporate made deals worth $11.9 billion.

While the numbers give strong signals of confidence and vision of our country’s corporate, the road has not been smooth. Recent reports suggest that around $17 billion deals were lost in the last fiscal. Some big ticket deals such as Reliance-LyondellBasell deal. While some deals such as Bharti-MTN and Sterlite-Asarco deals reached critical stage but fell out at the last moment. Industry experts suggest many reasons for deals turning sour. Valuation problems, clash of interest and some political hurdles always play a big role in seeing the deals to completion. Still, the scene shows maturity on part of the corporates .

Even though there may be fallout due to some untimely decisions as in Tata- JLR deal but Indian firms are ready to take all sorts of risks to expand their operations abroad. The Bharti- Zain dal has opened doors for our country’s firms to expand their business in the untapped but opportune markets of Africa. It is expected that other Indians firms may follow suit and will expand their market base beyond India. M&As will help Indian companies to put their mark on the corporate map of the world. Also, various sectors will develop further and prove the worth of Indian talent throughout the globe.

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