New Delhi: Tatas led the global M&A ambitions of India Inc. as domestic companies acquired companies abroad with a war chest of 11.37 billion while the foreign firms invested much less $2.06 in buying out the Indian firms in the first quarter of fiscal 07-08, according to industry chamber Assocham’s Eco Pulse Study (AEP) on “Mergers and Acquisitions in First Quarter 2007-08”.
Even on the domestic turf, the Indian firms stayed ahead of foreign companies in acquiring entities based and operating in India. As against the M&A worth $2.06 billion by the foreign firms in India, the Indian domestic acquisitions were worth $2.63 billion
“It goes to the credit of Indian entrepreneurs for reaching out to the world in a much bigger way than the overseas firms desire to acquire business in India”, said Mr. Venugopal Dhoot, President, Assocham.
Tata Group carried out massive buy-outs to the tune of $5.35 billion at domestic and international level during first three months of current financial year. Of this amount $4.53 billion was spent on global acquisitions, while $60 million was reserved for domestic consolidation activity. Tata Power Company took over Indonesia based PT Kaltim Prima Coal and PT Arutim Indonesia for $1.1 billion. Indian Hotels Company Ltd acquired Hotel Campton Palace for $60 million in United States.
Tata Steel entered into a joint venture with Vietnam Steel having 65% stake with the money worth of $2.1 billion. Buyouts worth $2.157 billion are in the pipeline by Tata Steel and Tata Tea.
M&A Valuations Value (in $ billion)
* Indian companies abroad 11.37
* Domestic level 2.63
* Foreign firms in India 2.06
* Essar Global has made second largest acquisitions amounting to $1.665 billion in steel sector during the period tracked by AEP. It announced take over of Algoma Steel based in Canada for $ 1580 million and Minnesota Steel in U.S for $85 million.
* United Breweries Group has undertaken M&A worth $1.3 billion within a 3-month time frame in the aviation (domestic) and liquor (abroad) industry. Kingfisher Airlines owned by the Group acquired 26% stake in Air Deccan for $134 million. On the international front, it took over Whyte & Mackay based in U.K for $1.16 billion.
Region Wise Analysis
USA was the most favoured destination of the Indian global hunters. Total deals amounting to $3 billion were accomplished by the Indian corporates in their quest for market expansion, integration with subsidiaries and consolidation of market position.
Acquisitions worth of $1.58 billion were made in Canada, making the North American region at $4.58 billion priced deals - the most sought after by Indian businesses.
Asia pacific was the second most preferred territory after North America as acquisitions valuing at $3.8 billion took place in the first quarter. Vietnam, Indonesia, Israel and Singapore were favoured places as deals worth $2.1 billion, $1.1 billion, $0.45 billion and $0.15 billion were undertaken by expansion oriented Indian companies in these countries.
India Inc. on world consolidation tour
Acquisition deals in Europe were valued at $2.89 billion, third largest after North America and Asia Pacific. Within the European region, maximum M&A activity worth $1.52 billion was undertaken by India-based companies in Germany.
UK was second to Germany as $1.2 billion was spent on taking over business entities operating in the country.
Italy and Poland were other countries where companies were being targeted by ambitious business leaders of India.
Sector wise analysis: International Level
Steel sector was the most dominant in terms of stake sales as the deals valuing $ 3.862 billion took place in Q1 of 2007-08 by Indian companies in global arena. Tata Steel and Essar Steel account for most of the restructuring activity in this core infrastructure segment.
Indian companies in energy segment made the merger deals to the tune of $3.05 billion. Suzlon Energy purchased 25% stake in Germany based Repower Systems for $1.35 billion. DS Constructions spent $542 million in acquiring Globeleq. Indian Oil Inc and Oil India Ltd together bought out 25% equity stake in Suntera Nigeria OPL 205 Ltd located in Nigeria for $60 million.
Top M&A observers Value (in $ billion)
Company Tata Group 5.4
Region North America 4.5
Country United States 3
Sector- Foreign Steel 3.86
Domestic Iron Ore 0.98
Automotives and auto components were the third most vibrant sector on M&A radar. Takeover deals by Indian auto companies in global markets were worth $2.28 billion. Sakthi Auto components (SAC) acquired Intermet Europe located in Germany for $129 million. Amtek Auto, Mahindra & Mahindra, Ashok Minda, Tata Autocomp Systems were the other big players in auto space.
Maximum numberof deals (around 7) took place in pharmaceuticals sector with the valuation of $653 million. The acquisition of Taro Pharmaceuticals by Sun Pharmaceuticals Industries for $454 million was the largest deal in the sector for the first quarter.
Jubilant Organsys paid $122.5 million for Hollister Steir Laboratories in pharma contract research segment. Cadila Healthcare Ltd, Plethico Pharmaceuticals, Zydus Cadilla were other prominent acquirers of foreign firms in the sector.
Retail ($151 million), IT ($66 million) and hospitality ($60 million) were other sectors, which recorded considerable M&A activity by the Indian corporates as part of their global expansion programme.
The sectors, which garnered the attention of foreign acquirers in India, were electrical ($487 million), financial services ($225 million), cement ($129 million), shipyard ($100 million) and auto ($97.5 million).
Among the domestic M&A, iron ore sector recorded highest valuation for the acquisition deal of 51% stake in Sesa Goa by Vedanta Resources for $981 million.
Visiting the phase of consolidation, the aviation sector registered three merger deals cumulating $637 million all in first quarter of current fiscal. The biggest acquisition was of Air Sahara by Jet Airways, which finally completed the takeover this quarter at $353.6 million. Kingfisher Airlines acquired 26 per cent preferential equity stake in Air Deccan at the cost of $134 million. The third merger was of GoAir with Paramount Airways at the value of $150 million.
The estimated deals cost in steel sector was $294 million. BPO sector recorded tbuy-out Intelenet Global Services by SKR BPO Services for $200 million. Genpact acquired Axis Risk Consulting for an undisclosed amount.
In auto segment, Mahindra & Mahindra undertook the 31% stake acquisition in Swaraj Mazda for $154 million. Food and beverages ($158 million) and financial services ($121 million) were other few vibrant sectors actively involved in consolidation activity.