Indian Companies Hunt Acquisitions

After decades of being stifled by strict foreign exchange controls, corporate India has gone on a shopping spree -- snapping up companies everywhere from Britain to Korea.

With India's economy growing at a cracking 8%, the nation's cash-flush firms are becoming global players, purchasing companies in all sectors from software to pharmaceuticals, information technology and energy.

While many of the acquisitions are small, that's seen as changing in coming years. "We're really at an exciting time for Indian business," said Alan Rosling, executive director of Tata Sons, holding firm of tea-to-telecoms Tata group, India's second largest conglomerate. "It's not just the Indian government liberalizing (the economy) -- it's the world globalizing," he told AFP.

Firms in Indian hands include well-known British tea brands Tetley Tea and Typhoo Tea, the trucking unit of South Korea's Daewoo Group and Bermuda-based bandwidth provider Flag Telecom whose underseas cables link the world.

Last year, the value of India's 118 purchases of foreign firms totaled $2.91 billion, said Marti Subrahmanyam, finance professor at Stern School of Business at New York University. That's around seven times the tally in 2001. While the amount is puny by world standards, analysts say India's takeover hunger will rise as firms aim to attain critical mass to compete globally and to leverage their low-cost production base.

India's biggest deals in 2005 included the $313 million purchase by Matrix Laboratories of Belgium's DocPharma, TV maker Videocon's acquisition of the color picture-tube business of France's Thomson for 292 million and Tata Chemical's $112 million takeover of British soda ash manufacturer Brunner Mond. Its products are used to make glass and detergents.

India's burgeoning business process outsourcing (BPO) sector, in particular, is extremely keen on foreign purchases, eager to acquire niche skills swiftly in such areas as retail, insurance or health care. "We need acquisitions to acquire relevant scale, capability and to plug gaps in service operatings," said Alok Mitra, chief financial officer of Mphasis BFL, one of the busiest BPO overseas buyers.

This foreign expansion flurry was impossible until recently. Indian firms were slow to hit the global acquisition trail because of tight government controls on exporting rupees as foreign reserves were too low. In 1991 reserves sank to less than a billion dollars, creating a financial crisis that forced India to open its economy to foreigners. Now, thanks to a rush of foreign investment, coffers are brimming at $140 billion and exchange controls have eased.

In fact, India's deal-making in 2005 represented just one percent of total global merger activity valued at $2.1 trillion , according to accounting firm KPMG. But India's global corporate profile is seen rising with business houses like the Tatas, the Aditya Birla Group, drugs heavyweight Ranbaxy, IT giants like Wipro and telecom majors like Bharti Tele-Ventures.

Copyright Agence France-Presse, 2006

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