India Inc's hunger to acquire businesses abroad is increasing. The value of overseas acquisitions by Indian companies more than doubled to $9.30 billion in 2004 from $4.5 billion in the previous year.
While the number of deals has not gone up significantly (316 in 2004 compared with 305 in 2003), the huge rise in terms of value indicates that Indian companies are ready to dig deep into their pockets for the right acquisition.
The party seems all set to continue in 2005 too. Example: the $5.60 billion acquisition of Basell by a consortium led by the Chatterjee group this month.
Harish HV, head of mergers & acquisitions at Grant Thornton India, for example, sees at least a 30 per cent jump in the number of M&As in 2005. Going by trends, the value of the total deals should more than double, he said.
Agrees Manish Thakkar, vice-president, M&A, at ICICI Securities. "We believe that the next 12-18 months will see major activity in oil and gas, technology, textiles, and health care - a large component of which will be cross-border in nature," he said.
A report by Grant Thornton, one of the largest accounting firms in the world, said cross-border M&As were on the rise as Indian companies were adopting an acquisition-led growth strategy, with the objective of getting a strong foothold in overseas domestic markets.
Harish said the acquisitions that hit the headlines were the big ones but there were plenty of small to mid-companies which were in the M&A game. This only showed the increasing confidence of India Inc to seize opportunities available in Europe and the US, he added.
Emerging as key sectors are information technology, BPO and pharmaceutical, according to analysts. Cost-leverage and customer-acquisition are other key reasons.
Pharma companies were acquiring to garner market share overseas and to compete effectively on a global scale, they said.
Dominic Price, MD and senior country officer - India, J P Morgan-Chase Bank, said corporate restructuring and multinationals buying into the large Indian consumer market had contributed to the spurt in acquisitions abroad.
Price said in the last five years, corporate India focused on improving asset returns to maximise capacity utilisation and gain operating leverage.
The focus now is on increased investment in capacities and assets. M&A capital is a part of this capital-raising process as business houses focus on core businesses and divert capital to higher-value projects.
Rajeev Gupta, joint managing director, DSP Merrill Lynch, said M&As were important for sectors which were consolidated in India (and therefore generated high ROCE) and which were growing at a rate lower than the average Indian industrial growth rate.
© 2025