India Inc M&As defy mkt volatility in ’08

Deals Sealed From Oil & Gas To Auto Sectors

Mumbai: One would think the subprime credit crisis, fluctuating commodity and equity prices and the closure of a myriad large investment banks and other financial institutions could have dealt a body blow to M&A and private investment activity in the country. Not quite so. Despite recent events, India has seen some of the largest deals in sectors that were till recently not very popular among Indian deal makers—micro finance, oil and gas and automotive sectors.
    There have been some landmark deals announced during 2008 (January to December 15, 2008) which displays India Inc's resilience during turbulent times. The year also witnessed several billion dollar deals, eclipsing 2007's seven deals by two additional deals, according to a new report.
    What is hearty to note, India Inc remains a favourite destination for international private equity funding and inbound M&A. The country is also an active investor in international companies, thereby increasing its global footprint. There were 24 M&A deals with value of over $250 million in 2008 as compared to 22 deals and 20 deals in 2007 and 2006 respectively. Take Daiichi Sankyo's pharma target Ranbaxy Laboratories for $4,506.31 million for a 60% stake. Or even Oil and Natural Gas Corp Videsh's acquisition of Imperial Energy for $2,800 million. HDFC Bank acquired Centurion Bank for $2,377.50 million, while Tata Motors acquired the operations of Jaguar and Land Rover for a cool $2,300 million. All in 2008.
    The year also saw a spurt in domestic M&A activity. The value of domestic deals announced has increased from $4.99 billion and $2.85 billion in 2006 and 2007 respectively to $5.09 billion in 2008, even though the volume of domestic deals decreased from 321 deals in 2007 to 171 deals in 2008. "Corporate India has done significant number of M&A transactions in 2008 with a value of over $30 billion. It is creditable to note that this has been achieved irrespective of the global economic slowdown and dwindling stock prices," said C G Srividya, partner, specialist advisory services at Grant Thornton.
    She adds: "It is noteworthy that the deal traction on M&A has been good andstable in all quarters, irrespective of the volatility in economy and market. After several years, we have seen a significant amount of high value inbound deals, showing the increasing interest and the attractiveness of Indian businesses to international companies." Last year, the inbound value was primarily from a single large deal. Interestingly, some of the typical sectors such as oil & gas, automotive, chemicals among others have contributed significantly to the deal value.
    Deal volumes (M&A and PE together) though have dropped in 2008 as compared to 2007. There were more than 1,000 deals in 2007, as compared to 751 in 2008. The value of cross border deals (both inbound and outbound) announced in 2008 (January-December 15) has reduced by almost 47% from 2007, according to the annual Grant Thornton report.
    The value of inbound deals has fluctuated from $5.4 billion in 2006 and $15.50 billion in 2007 to $12.48 billion this year. The value of outbound deals fluctuated from $9.91 billion in 2006 and $32.76 billion in 2007 to $13.15 billion in 2008.
    PE investments in Indian companies have crossed the $10 billion mark in 2008. "While private equity has grown considerably over 2006 and prior years, it is about 45% less than last year. This is considering that the billion dollar deals that were seen last year were missing this year and the significant decline has come only from the second half of 2008," Srividya added.