India's giant Tata group is leading the way as cash-flush companies go on an overseas buying spree, racing to acquire a global footprint. Earlier this year, Tata bought a 30% stake in New York-based Energy Brands Inc. for $677 million, India's biggest cross-border acquisition so far.
Now India's largest private sector group with $22 billion in annual sales is eyeing a far bigger prize. On Oct. 5 it said it was considering a bid for top British steelmaker Corus group that analysts have valued at up to $10.4 billion. The combined group would be among the top ten global steel industry players in output terms.
Indian "companies now have the financial muscle and operational skills to make these sorts of acquisitions," said Anjan Roy, economic advisor to the Federation of Indian Chambers of Commerce and Industry.
India's outbound investment could even top inbound foreign direct investment (FDI), according to figures from British data provider Dealogic. Outbound investments from India this calendar year total $7.2 billion, up from $4.5 billion in all of last year. That is triple the amount from the year before, said Dealogic, which counted 112 foreign acquisitions in 2005 which would work out to about three a week. If the Tata acquisition of Corus happens, India could see outbound investments exceed the $12 billion s worth of FDI forecast by Commerce Minister Kamal Nath for 2006.
The spending spree is being driven by strong profits, access to historically lower Indian interest rates, and deregulation which has enabled less costly overseas borrowings, said Deepak Lalwani, director of London brokerage Astaire and Partners.
Information technology and pharmaceutical firms were the first to make the deals before others joined the fray. Cash-rich and eager to venture into new markets, gain access to natural resources, acquire technology or bulk up on size, Indian firms have been snapping up whatever suits their business plans.
Copyright Agence France-Presse, 2006