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Corporate India on acquisition spree: CII

Indian industry, with an urge to increase its global footprint and armed with liberal Govt policies, is right now on an acquisition spree, says a CII, a leading industry body.

business Updated: Apr 08, 2007 15:40 IST

Indian industry, with an insatiable urge to increase its global footprint and armed with liberal governmental policies, is right now on a mergers and acquisition spree, says a leading industry body.

Indian companies today are much more aggressive than earlier due to a liberal and conducive environment that help them foray into the world economies with huge amount of investments, says the Confederation of Indian Industry (CII) in a report.

With the Tatas acquiring the Anglo-Dutch company Corus, Hindalco's taking over Canada's Novelis, the trend for mega deals by Indian companies have been set.

It is expected that India's investment abroad will soon surpass foreign investment in India.

"Indian companies are spreading their wings beyond borders and acquiring foreign assets to serve global markets. The total value of M&A deals in India has been growing at a compounded annual growth rate of around 28 per cent between 2002 and 2006," says Sarita Nagpal, head, manufacturing services division, CII.

According to CII, M&A deals have increased from $7.5 billion in 2004 to $21.4 in 2006.

Quoting a report by Grant Thornton, a global consultancy firm, CII said: "The number of cross-border deals from India in 2006 grew much faster than domestic deals."

The CII report noted that the largest proportion of acquisitions abroad is largest in North America followed by Europe, which is fast emerging as a favourable investment destination for Indian companies.

The Indian pharma sector has been aggressive in exploring investment opportunities abroad, with a total deal signed for over $2.2 billion.

This is closely followed by the Indian IT and ITES sector and then comes energy sector, CII said.

"ONGC's acquisition of equity stakes in a couple of oil blocks in Columbia and Brazil as also Suzlon Energy's acquisition of Hansen led the M&A deals."

However, according to the body, acquisition financing options in India have still not matured in its full potential. But the role of structured finance transactions is becoming more and more important.

"Indian companies are likely to take ever larger steps globally, particularly in the US and Europe, while the scale of domestic Indian companies will continue to attract both strategic and private equity interests, the latter fuelled by the growing funds raised from Western investors seeking high returns," Nagpal said.