India Inc set to cash in on global financial crisis

Some of the big-ticket deals during the nine-month period include ONGC Videsh’s acquisition of the UK’s Imperial Energy (USD 2.8 billion), Tata Motors’ acquisition of British marquees Jaguar and Land Rover (USD 2.3 billion), Tokyo-based pharmaceutical firm Daiichi Sankyo’s acquisition of Ranbaxy Laboratories (USD 2.4 billion), HDFC Bank’s buyout of domestic rival Centurion Bank of Punjab (USD 2.38 billion) and Italy-based Telecom Italia’s infusion on USD 2 billion in Unitech’s telecom arm Unitech Telecom.

As per the report, cash-rich acquisitive Indian firms are set to make new purchases as target companies have become significantly cheaper compared with just six months ago.

It said the cache of cash as an acquisition currency has increased as global recessionary trends have driven stock prices worldwide to historic lows.

“Significant aspect of the M&A activity has been India Inc’s eyes on global opportunities, which have become more prominent in the backdrop of the global recession,” IndusView Advisors Chairman Bundeep Singh Rangar said.

The consultant said infrastructure-related industries dominated M&A deals, accounting for USD 11.8 billion, or 45 per cent, of the total transactions this year till September.

“The traction in the infrastructure M&As is symbolic of the need for world-class facilities, adoption of internationally applicable best practices, experienced global management expertise and technology applications to accelerate growth in the Indian economy,” Rangar said.

The Indian government has responded to an urgent demand for new infrastructure with projection of spending 9 per cent of the country’s GDP on the sector by 2012.

Rangar opined that focus towards the sector was buoyed by urgency to match global standards. “This augmentation is expected to cost and attract investments to the tune of USD 500 billion over the next five years.”

As per the estimates of IndusView, one third of this investment would come from the private sector, resulting in an unprecedented investment opportunity with corresponding inorganic activity.

Infrastructure sector is followed by the power sector cornering about USD five billion. The top two power deals include acquisition of Dutch firm InterGen NV by GMR Infrastructure for USD 2.8 billion and state-run ONGC Videsh’s 2.8 billion dollar acquisition of the UK’s Imperial Energy.

“Among the infrastructure sectors, power sector was followed by telecommunications that emerged the second most consolidating sector with USD 3.75 billion, a share of 32 per cent in the infrastructure sector deal value and 14 per cent share in the overall M&A deal value,” the study pointed out.

The other sectors, which have significantly contributed to the M&A activity, were banking and financial services and pharmaceutical sectors with deal sizes of over USD 3 billion each. These sectors were followed by automobile industry with about USD 2.5 billion worth of deal value.