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India Inc on acquisition trail in Europe

It's no coincidence that two of the biggest acquisition deals struck by Indian firms this year were in Europe.

india Updated: Apr 20, 2006 19:37 IST

From a land of cheap labour for shipping low-end jobs to corporate predators, India Inc.'s profile has undergone a sea change in Europe - thanks to a string of recent big-ticket acquisitions.

Although India-born Lakshmi Mittal's hostile bid of $22.5 billion for European rival Arcelor continues to hang in balance despite the passage of nearly three months, India Inc is eyeing takeover opportunities in Europe like never before.

It is no coincidence that two of the biggest acquisition deals struck by the Indian companies in the current calendar year were in the European market. A string of other big-ticket takeovers are in the pipeline, said analysts.

The latest to join the list is Indian wind turbine maker Suzlon Energy, which last week bought Belgium-based Hansen Transmissions International for $565 million in an-all cash transaction.

"The acquisition of Hansen gives us technological leadership and will make Suzlon a leading integrated wind turbine manufacturer in the world," said Tulsi Tanti, chairman and managing director of Suzlon Energy.

"The company has an excellent management team and over a period of time we will work with them in developing supply chain synergies, expanding capacity in Belgium and development of additional capacity in new emerging markets in Asia."

Suzlon's acquisition of the world's second largest maker of wind turbine gearboxes made it the second-largest foreign corporate takeover by an Indian company in the current year.

Earlier this year, Indian drug major Dr Reddy's Laboratories surprised the stock market by acquiring German generic drug maker Betapharm for a staggering $570 million to expand presence in the European market.

The deal followed other major acquisitions in the pharmaceutical space last year that includes Matrix Laboratories takeover of Belgium's Docpharma and Wockhardt buying German drug maker Esparma for $11 million.

Bangalore-based contract manufacturing firm Kemwell Private Ltd. said last month it had bought Pfizer's production plant in Uppsala, Sweden for an undisclosed sum. The acquisition is expected to be completed by April.

Analysts said the string of acquisitions in the European market in recent months were helped by spiralling Indian industrial earnings on the back of a booming economy and a blistering stock market rally.

"For the Indian corporate houses, the world has truly become their playing field. Acquisition has become the key business strategy for expansion in the overseas market," said DH Pai Panandiker of think tank RPG Foundation.

"Europe is a big market for a vast spectrum of industrial sectors. The companies that want to have a global footprint will not like to ignore such a huge market at any cost," Panandiker said.

Even as Mittal Steel's takeover bid remains at an initial stage, a host of Indian firms have quietly risen from the shadow in recent months and taken over European companies representing areas like drugs, energy and chemicals.

While the economy is poised to expand by 8.1 percent in the year ending March 31 making it one of the fastest growing economies in the world, the benchmark share market index has risen over 15 percent in the current year so far.

Foreign institutional funds, which provide crucial support to long-term rally in the Indian capital market, pumped in a record $10.7 billion in the market in 2005 and have already bought shares worth over $3.37 billion this year.

"The biggest change that has happened to the Indian corporate sector is the mindset change," said N Srinivasan, director general of the premier lobby group Confederation of Indian Industry (CII).

"Indian companies are now acquiring firms of global scale to get proximity to the market they are targeting. There is an appetite to become global player by adding capacity, getting new technology and proximity," Srinivasan said.

And fuelled by this passion of establishing a global footprint, India's once-insular corporate firms went on an overseas shopping spree in 2005 like never before.

The past calendar year saw Indian companies striking as many as 100 acquisition deals in the overseas market by spending a total of whopping Rs 106.70 billion ($2.37 billion).

This compares with 60 acquisition deals worth Rs 76.50 billion ($1.7 billion) in 2004, according to India Advisory Partners, a London-based database firm on mergers and acquisitions.

First Published: Mar 19, 2006 14:10 IST