Subprime crisis, oil prices can dampen M

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New Delhi, Feb 14 (UNI) Despite a positive outlook for Merger and Acquisition (M&A) activities for Indian companies in 2008, the subprime crisis in the US and the spiralling prices of oil can prove to be a dampener, said a PwC report.

''On an overall basis, the outlook for M&A activity in 2008 looks fairly positive. However, there will be some challenges, in particular the ongoing sub prime crisis in the US, which has made borrowing for overseas acquisition more difficult and costlier,'' said the PwC report titled ''India Inc on a roll: India M&A update January 2008.'' The report adds that several other issues could influence M&A activities in 2008. Rising oil prices coupled with possible global economic slowdown could impact the economy in India as well, as market sentiment with consequent dampening of M&A activity.

''There is also concern about the destabilising effect of terrorism in the west and grass roots militancy in the east on the investment climate,'' said the report.

The report also predicts that a regulatory change could have a negative effect in the short run with respect to the role of the Competition Commission of India (CCI).

It has been proposed that prior intimation to the CCI would be mandatory in case of combination between persons, groups or companies, if the operations of the combined entity result in assets of over Rs 1,000 crore or turnover of over Rs 3,000 crore in India. Also, net assets of 500 million dollars or turnover of 1,500 million dollars in case one of the companies is situated outside India may need CCI approval.

These thresholds are quite low, said the PwC report, in context of the size of Indian business today and if implemented as such would require even medium sized deals to be potentially be cleared by the CCI.

The report also brings out several sliver linings with the possible positive regulatory changes which could give a further fillip to M&A activity.

One such expected change is the introduction of the new Company Law regime, which amongst other things proposes to shorten the merger approval process in companies where no public interest is involved, by eliminating the requirement for court approvals.

''We also expect a further liberalisation in foreign investment norms. These could include raising the Foreign Direct Investment cap for petroleum refining from 26 per cent at present to 49 per cent and permission to invest up to 100 per cent in areas related to civil aviation such as ground handling, maintenance and repair and air charter services, as against 49 per cent at present,'' said the report.

It is also anticipated that the government would allow up to 49 per cent foreign investment in commodity exchanges.

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