 | « Back to article | Print this article |
The $10 billion bid by Tata Steel for British steelmaker Corus Group would go down in the history books as the biggest cross-border acquisition by an Indian company -- if it succeeds.
Yet whether or not the acquisition comes to pass, the underlying trend is clear. Years of high-speed growth have made a variety of outfits cash-rich and eager to expand abroad.
True, most India companies lack the scale and deep pockets of Tata Group, a sprawling industrial empire controlled by Ratan Tata. The group's steel unit has acquired Singapore's NatSteel and bought a majority stake in Millennium Steel, a Thai company. Outside of steel, the Tata hunt has bagged other quarry such as Britain's Tetley Tea, U.S. telecom network operator Tyco Global, Daewoo Commercial Vehicles, and Boston's Ritz Carlton hotel.
A variety of smaller Indian companies have also been on an acquisition spree during the past two years. There have been over 125 cross-border deals out of India since 2004. Some $5 billion worth of deals have been transacted this year following nearly $4 billion in 2005. "It is truly the phase of Indian globalization," says Rashesh Shah, CEO of Edelweiss Capital.
Good reputation
And in the past two years, big and small Indian companies in every sector have been expanding their footprint beyond Indian shores. Aditya Birla group, with a presence in nonferrous metals, telecom, and apparel, consolidated its presence in outsourcing and information technology with its takeover of Canada's Minacs Worldwide.
Tractor and auto major Mahindra &
Indian companies are sitting on piles of cash and have gained credibility to attract more bank financing, say observers. A few years ago, transactions in the $25 million to $100 million range were the norm. That has changed. "To do a $100 million deal earlier was a stretch. Companies have now achieved financial and integration maturity," says Munesh Khanna, managing director and head of investment banking at Merrill Lynch in Bombay.
Big dowries
On top of that, Indian companies with quality management and strong earnings performance are also finding it easier to raise money in international capital markets. Last year alone, Indian companies raised more than $30 billion worth of foreign currency convertible bonds, U.S. and global depository receipts, initial public offerings, and private equity.
That adds up to a good vote of confidence in Indian management. Of course, a few failed cross-border acquisitions by Indian companies could quickly change that. But right now, Corporate India is in a very ambitious mood. "For the first time, we are seeing [Indian companies with the kind of] scale to marry large, complex organizations," says Shah with Edelweiss Capital.