New Delhi, Jan 15 (UNI) The foreign companies remained upbeat about merger and acquisition (M&A) opportunity in the country in third quarter over second and first quarter of the current fiscal, an industry body said today.
Foreign companies especially from Europe are upbeat about M&A opportunity in the country as evident by rise in the inbound deals by over ten times to 2.5 billion dollars in third quarter, even as the buyout momentum in the Indian companies slowed in third quarter, according to the findings of Assocham Eco Pulse (AEP) Study on 'Trends in M&A'.
The inbound M&A deals worth 2.5 billion dollars accounted for half of the total deal value struck by the India Inc during October-December period (5.1 billion dollars), it added.
On the domestic front, there was a decline in the M&A activity by 78 per cent with total deal value reducing from 1.55 billion dollars in Q2 to smaller value of 331 million dollars in Q3.
The global takeovers of Indian companies have also declined by 38 per cent from 3.69 billion dollars in second quarter to 2.27 billion dollars in the third quarter of current fiscal.
The AEP is based on the mergers and acquisitions of stakes among the companies and exclude the private equity deals.
In the backdrop of global financial market crisis and slowdown expectation, a trend reversal was witnessed in the third quarter as the takeovers by foreign companies in India jumped from 153 million dollars and 193 million dollars in first and second quarter respectively to 2.5 billion dollars in Q3.
''As the world economy faces the serious problem of slowdown with recessionary expectation in the US, the companies in Europe, the US, Japan are looking forward to expanding their business in the second fastest growing economy of India with a robust domestic demand,'' said Assocham President Venugopal N Dhoot.
Europe, with four mega deals, remained the largest source of inbound deals in India valuing to 2.19 billion dollars. Around four deals were closed by the US companies in sectors like education, finance and capital goods, but the deal values were kept undisclosed in all the cases.
Two Japanese firms acquired stakes in Indian companies, including Mitsui which bought 10 per cent stake in India Steel Corporation for 16.25 million dollars. Another Japanese company, NTT Data Corporation acquired 68.7 per cent stake in Vertex Software for undisclosed amount.
The prominent sectors which attracted the maximum foreign interest in Q3 were pharma (1.65 billion dollars), auto (412 million dollars) and cement (80.5 million dollars).
Glaxo SmithKline led the pack of overseas companies occupying Indian M&A space with acquisition of Reliant Pharmaceutical for 1.645 billion dollars.
It was followed by German company Daimler which bought 60 per cent stake in the Hero Group for 412.5 million dollars.
Portuguese cement major CIMPORE undertook the acquisition of 53.3 per cent stake in Shree Digvijay Cement for 80.5 million dollars.
The M&A deal valuation has been recorded at 23 billion dollars for the nine month period in the fiscal so far. The overall M&A value remained almost similar for the Q2 and Q3, thanks to the rise in inbound mergers compensating for the fall in domestic and offshore acquisition deals.
About 69 deals were recorded in Q3 valuing 5.4 billion dollars as compared to 60 deals in Q2 for 5.1 billion dollars.
The pharma sector, which had a very low share in first and second quarter, went on the high consolidation spree in last three months of 2007, topping the sectors chart with 1.9 billion dollars worth deals announcement. Besides Galxo SmithKline, Cadila (80 million dollars), Plethico (81 million dollars) and Wockhardt (70 million dollars) cracked important takeover deals.
The auto sector, struggling to keep their sales intact despite high interest rates, carried out many cross border acquisitions. The total deal value in automobiles and auto component segments were recorded at 990 million dollars. As the 412 million dollar deal between Daimler and Hero Group remained largest in the sector, the other deals included acquisition by Mahindra Systems and Automotive Technology (S P Metal Forgings for 300 million dollars), Amtek (Triplex kelton Group for 150 million dollars) and Bajaj Auto (KTM Power Sports for 75 million dollars).
The IT sector which incurred maximum M&As in second quarter, was bullish in third quarter as well with 19 deals aggregating to 723 million dollars. Hinduja TMT Global Solutions (300 million dollars) and Cognizant Technology Solutions (135 million dollars) led the pack of IT companies.
Due to the acquisition of Malaysia based Hualon Corporation by Reliance Industries for 500 million dollars, the textile sector appeared at fourth place among the top sectors. The other prominent sectors included Hospitality (280 million dollars), Entertainment (125 million dollars) and Financial services (110 million dollars).
While the underlying ambitions of home grown companies are to go global, the pace of their buyouts at foreign turf seems to have reduced. The outbound deals in Q3 have come down by 38 per cent over the second quarter. Maximum of acquisitions by Indian companies were directed at the US valuing to 996 million dollars as compared to 2.27 billion dollars in Q2.
After the US, the Asian countries including Malaysia, Indonesia, Bangladesh, China, Singapore were targeted most by the Indian firms with their aggregate valuation recorded at 860 million dollars in Q3. Around ten deals were signed in the Asian region.
Around 10 deals of small size ranging between 150 million dollars to 12 million dollars were seized by the Indian companies in Europe.
The deal valuation rose to 467 million dollars in Q3 from 326 million dollars in Q2 of the current fiscal.
UNI PDT SBA RK1800