London: In a sign of the emerging market giant’s burgeoning power, Indian investment into the UK is poised to outstrip British investment in the subcontinent, reversing the flow of capital for the first time since the days of Raj.
A research by Close Brothers Corporate Finance suggested that by 2010, Indian companies will buy up to 150 UK businesses a year, while British companies will acquire just 138 in India.
India’s booming companies are increasingly willing to spend money abroad, with the UK being a favourite target. Of the 12.4 billion pounds in deals announced in the last five years more than half — 6.8 billion pounds — was spent in Britain.
Other European countries lagged far behind with the next most popular, Germany, picking up just a billion pounds worth of Indian investment.
Close Brothers’ managing director Richard Grainger, who has just signed off a deal to add Bangalore boutique Allegro Capital advisors to Close’s international network, said the strong cultural ties between the UK and India encourage investment.
“We have a linguistic advantage here and in the US, while in countries like France and Germany there are employment issues around investing,” Grainger told the British daily.
Grainer pointed out to Tata’s 2005 acquisition of UK technology business INCAT as a turning point in the investment trend. “That was the first sign of the wall of money coming out of India,” he said.
Tata eclipsed its own deal earlier this year, when it won the 6 billion-pound battle for Corus, the British-Dutch steel company.
Indian tea company Apeejay International also scored a victory when it picked up Britain’s Typhoo in 2005, taking tea back to India.
If India’s acquisition spree continues on trend, the emerging market giant will buy 31 UK companies this year, almost double that to 52 next year, then push up to 90 corporate raids in 2009.
In the same period British companies will also increase investment in India, but by nothing like the same rate. From 50 acquisitions this year, UK companies are expected to pick up 99 companies in 2009.
Grainger noted that India is growing rapidly and it would soon need serious investment in its infrastructure. “I can see at that point that British companies will start buying up assets there to be part of that investment.”