India turning into a hotspot for capital : ET Story

India turning into a hotspot for capital

India Inc attracted deals worth $68.32 billion for the year 2007, significantly higher than $28.16 billion in 2006 and $18.35 billion in 2005. The jump underlines India as a hot destination for merger and acquisitions (M&A), and also for private equity (PE) investment. Of the total of $68.32 billion deals, M&A accounted for $51.17 billion while the remaining $17.14 billion was in the form of private equity investment. As per a Grant Thornton report there were 661 M&A deals, including 348 cross-border deals and 313 domestic deals.

Among cross-border transactions, 240 were outbound ones, where Indian companies made overseas acquisitions. Such deals amounted to $32.73 billion. Tata Steel’s acquisition of Corus for $12.2 billion was the largest among outbound deals, followed by Hindalco-Novelis, and Suzlon Energy-RE Power with transaction value of $ 6 billion and $1.7 billion respectively.

There were 108 inbound M&A deals amounting to $15.61 billion, where global companies or their subsidiaries acquired Indian businesses. Vodafone tops the list of such kind of deals with transaction value of $10.8 billion. The global telecom giant has acquired a majority stake of 67% in India’s one of the leading telecom players, Hutchison Essar.

An industry-wise analysis showed that steel and telecom sector clearly dominated the M&A scene as both the sectors saw deals amounting to $14.9 billion and $11.3 billion respectively in '07. Aluminium, power and energy sectors also contributed substantially to the heightened M&A activity in the country. The trend shows a diversion of M&A activity to core sectors from IT, pharma, healthcare and biotech which had seen high value M&A deals last year.

Global private equity players have been quite bullish on India story, which is also reflected in a strong flow of their investments into the country. In 2007, there were a total of 386 PE deals worth $17.14 billion, substantially higher than 302 deals amounting to $7.86 billion in 2006 and 124 deals worth $2 billion in 2005. Bharti Airtel and GMR Infrastructure are the two notable examples where the companies have attracted PE deals worth $1.9 billion and $1 billion respectively. HDFC and DLF are few other listed companies roping in PE investors.

Seven out of the top ten deals involved real estate and infrastructure-related companies, according to Grant Thornton. “The heightened deal activity is a sign of M&A becoming a key element of strategy for India Inc. There is again significant growth in Private Equity which is now a major international force and now a significant part of the capital raising by India Inc,” Grant Thornton partner (corporate advisory services), Harish HV said. However, he is concerned that there could be possible dampener in the form of competition bill which seeks to examine all large M&As.


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