Even as the MTN merger saga continues, India’s success in buying foreign companies continues to draw international attention. Outbound FDI is expected to cross $35 billion (Rs1.5 trillion today) in 2007-08, according to one estimate.
Now look at China. It has invested $26 billion in just one quarter—the first three months of 2008. A lot of this is state-led buying of natural resources places such as Africa, to secure supplies to feed a growing economy.
But that is not the entire story. An article in the latest edition of The McKinsey Quarterly shows how the scope of FDI from China is changing. Other factors are at play, such as access to new markets, technologies and diversification.
Should Indian companies worry? There is no need to. Falling corporate valuations in the West will throw up ample opportunities for both Indian and Chinese firms. The more important issue is whether shareholders will benefit. McKinsey says that Chinese firms have struggled to create value in outbound deals. It remains to be seen how their Indian peers fare.