Indian companies are likely to focus on acquiring coal and iron ore assets in the mining space this year,especially in Indonesia,Australia and Africa,says a report.
“We expect that coal and iron ore are likely to remain the focus of mining M&A during 2012,although other commodities including copper and zinc will also be targeted.
“Indian companies are likely to continue looking to Indonesia,Australia and Africa for growth,increasingly opting to acquire outright rather than simply through off-take agreements,” global consultancy Ernst & Young (E&Y) said in a recent report.
Coal was one of the most sought after assets in the mergers and acquisitions deals last year. Going by estimates,there were about 161 transactions targeting coal or initiated by coal entities in 2011.
Even though India is the world’s second largest coal producer,the country is grappling with acute shortage of the dry fuel which is mainly hurting power and fertiliser sectors.
Coal production in the country is projected to see a shortfall of 142 million tonnes this year.
According to E&Y,coking coal assets were in demand even as many deals did not get completed last year mainly due to strong competition from Chinese investors.
The report noted that investors seeking greater exposure to Chinese demand would look for assets in Indonesia and Mongolia,while those targeting “the longer Indian imbalance will focus on Australia and Indonesia”.
“With the exception of the domestic oil and gas deals,coal remained the most targeted commodity by the Indian mining and metals companies,representing 94 per cent of India’s outbound investments during 2011,” it said.
In signs of soaring demand for the commodity,the value of deals involving coal assets shot up to USD 41.4 billion last year from USD 17.9 billion in 2010.
“This activity was primarily driven by major players looking to boost production capacity to meet increasing demand from China and India,” the report noted.