Last year was a record year for Indian companies turned hunters, traversing the globe in search of quarries. What does 2006 hold in store for India Inc?
Money is no longer a determinant, for with the RBI raising the ceiling of overseas investments by Indian companies in foreign joint ventures and/or wholly-owned subsidiaries from 100 to 200 per cent of their net worth under the automatic route, the decks were cleared last year itself.
And Indian companies big and small are sitting on mountains of cash. Net worth essentially means paid-up capital plus reserves.
Hemant Luthra, president of M&M’s auto components play MSAT, reckons that with so many companies in the west having gone into chapter 11, a whole new window of opportunity exists for financially sound Indian companies. This is exactly how and why Indian companies using the leveraged buy-out model are buying companies overseas. Bajaj Auto chairman Rahul Bajaj says, “This proposal is of great help to profitable Indian companies that are hoping to expand overseas.”
The Hindustan Times with the help of CMIE data has put together a list of the top 10 companies by net worth in India for the year 2005. And the results speak for themselves. Public sector muscle is obvious with as many as eight companies in the A list, the only two non-PSU majors in the list being RIL and ICICI Bank.
Interestingly, only ONGC, GAIL and, to some extent, Indian Oil and SBI are using their war chests. Through its subsidiary OVL, ONGC continues to make tracks in the great game. OVL has invested over $4.5 billion in recent years in acquiring oil and gas equity internationally. The jury though is still out on their hit rate. Reliance Industries, which has acquired Flag Telecom and Trevira in the past, was all set to bag one of the biggest deals in Indian corporate history when it made an audacious bid for BP’s petrochem unit Innovene. It is believed that the asking price proved to be the deterrent, though Mukesh Ambani was willing to cough up as much as $8 billion.
{{/usCountry}}Interestingly, only ONGC, GAIL and, to some extent, Indian Oil and SBI are using their war chests. Through its subsidiary OVL, ONGC continues to make tracks in the great game. OVL has invested over $4.5 billion in recent years in acquiring oil and gas equity internationally. The jury though is still out on their hit rate. Reliance Industries, which has acquired Flag Telecom and Trevira in the past, was all set to bag one of the biggest deals in Indian corporate history when it made an audacious bid for BP’s petrochem unit Innovene. It is believed that the asking price proved to be the deterrent, though Mukesh Ambani was willing to cough up as much as $8 billion.
{{/usCountry}}GAIL, Indian Oil and HPCL are now slowly trying to leverage their net worth to make acquisitions abroad.
What is interesting though is how the solidity of Indian companies is now beginning to manifest itself. Look at SAIL, year on year its net worth has jumped by a staggering 115 per cent from Rs 4,659 crore to Rs 10,0012 crore. Similarly, ICICI Bank has jumped by 56 per cent.