Deals necessary, but overvalued: CEOs

Deals necessary, but overvalued: CEOs
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First Published: Sun, Jun 03 2007. 08 33 PM IST
Updated: Sun, Jun 03 2007. 08 33 PM IST
New Delhi: Corporate India is all game for its global merger and acquisition spree, despite a majority of its top managers believing they are paying much more than the true value of the target companies, shows a survey.
While there is a near-consensus among industry players and analysts that aggressive buyouts are necessary for growth and geographic expansion, just 22% among 100 top executives opined in a survey that the companies were not paying more than the true value for the acquisitions.
“Most executives felt that the acquisition trends reflect India Incs global leadership aspirations and that M&A is an integral part of companies globalisation strategies,” global research and analysis firm Evalueserve said in a white paper, discussing a survey of 100 top Indian executives on recent merger and acquisitions by domestic companies.
According to the survey conducted by Greenfield Online for Evalueserve, 56% of the respondents felt these deals were overvalued, 22% said the companies were not overpaying, while 22% opined that they were not sure.
However, most of the managers conceded that given the strategic aspirations of the acquirers, they did the right thing by moving aggressively on these buy-outs, as the companies have little choice but to pay more than the ‘true value´ in a highly competitive bid atmosphere, hoping that they would be able to over-achieve on value realisation.
Such merger and acquisition activities are also being seen as indicators of the Indian growth story and serve to boost market sentiments, it said, adding that over 60% of respondents felt that such deals demonstrated a high growth phase in the Indian economy.
Reporting of remittances is currently required to be made through authorised banks in either of the two forms — ODR for remittances made for overseas direct investments and ODG for overseas acquisitions made under ADR/GDR Stock Swap Scheme.
RBI has taken the step pursuant to the annual credit policy with a view to improve the coverage and ensure monitoring of the foreign exchange flows.
The new reporting format, which prescribes same form for overseas investment, either under the automatic route or under the approval route, has four parts including reporting of remittances, annual performance report (APR) and report on closure/disinvestment/voluntary liquidation/winding up of JV/ WOS.
The Reserve Bank, however, said the revised form is only a rationalisation of the reporting procedure and there is no change or dilution in the existing eligibility criteria/ documentation/limits.
In cases of overseas investment under the automatic route the form should be directly submitted to the RBI, while in case of approval route the form should be submitted after scrutiny and with specific recommendations by the designated authorised bank, the monetary regulator said.
Meanwhile, the RBI also said it proposed to liberalise the procedure for the hedging of ‘genuine exposures´ with particular focus on small and medium enterprises (SMEs) and resident individuals.
The main objective of the proposed liberalisation is to simplify the documentation requirements as well as ‘dynamic´ hedging of exposures as mentioned in the annual credit policy. RBI has put a draft circular in this regard on its website for public comment.
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First Published: Sun, Jun 03 2007. 08 33 PM IST
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