India Inc saves Rs6,500 cr in M&A due to weakening dollar

India Inc saves Rs6,500 cr in M&A due to weakening dollar

New Delhi: India Inc, which has been on an acquisition spree of late, is estimated to have saved a whopping Rs6,500 crore in buying out overseas firms in the last six months as the rupee strengthened against the dollar, industry body Assocham said in a study.

Indian firms concluded 70 merger and acquisition deals between April and September, spending $14 billion and would have saved as much as Rs6,500 crore ($1.66 billion) because of over 10% rupee appreciation against the greenback, an Assocham Eco Pulse (AEP) study said.

“While homegrown IT companies are struggling to cope with the rupee pressure, the currency appreciation has given an advantage in terms of prospects for inorganic growth worldwide," it said.

The IT sector, which dominated the overseas M&A activity in the second quarter with deals worth $1.56 billion, would have saved Rs795 crore in first half of this fiscal.

In tandem with the continuous decline in dollar value, the US remained the most favourite hunting ground for Indian companies in both the first as well as second quarter.

While overall overseas buyouts of India Inc fell 64% in the second quarter, valuation of deals with US firms remained the same at $2.9 billion for both quarters.

On the other hand, buyouts by Indian companies in Europe witnessed a sharp decline of 88% in the second quarter as compared to the first quarter this fiscal. The Indian currency has risen about four per cent against the euro since March this year.

The valuation declined from $2.89 billion in the first quarter to $326 million in the second quarter.

While the absence of big acquisitions and global slowdown can be held responsible for the sharp decline in M&As by domestic firms in international market, rupee appreciation played an important role in keeping India Inc active in the US, Assocham President Venugopal Dhoot said.

The chamber said it has been monitoring M&A deals since April this year quarter by quarter. It tracked a total of 125 deals for the first half of this fiscal across sectors including IT and ITes, hospitality, steel, communications, infrastructure, textile, telecom and financial services.

The study is based on announcements made by companies. Of the total 125 deals in first half, 70 deals were completed in the offshore markets. Around 24 deals were completed in the US and 28 in Europe.

The inorganic expansion activity cooled down within the country also. Valuations fell 40% while the number of deals remained almost at the same level in both the quarters.

As compared to $2.63 billion worth of deals in the domestic market in first three months, the amount fell to $1.55 billion in the following three months.

On the contrary, foreign firms remained upbeat on India growth story as they jacked up their acquisition valuations by 25% from $153 million in first quarter to $193 million in the second quarter.