FDI outflow to touch $ 15 million this year

New Delhi, Mar 16: The Foreign Direct Investment outflow is anticipated to cross 15 billion dollars mark by the end of this calendar year as more and more Indian manufacturing companies are invading cross-border territories for acquisitions.

A study on FDI outflow and role of manufacturing in the mergers and acquisitions front stated that the year 2007 promises to be a year of deals varying in size from few million to billion dollars, dominated by manufacturing.

''Apparently, the balance of power in manufacturing has started to shift to India more recently, apart from China and Brazil.

Moreover, the number of deals will also be much higher than the previous year,'' said the analysis done by industry body Assocham.

Owing to the restructuring taking place in Europe, Indian companies are targeting European entities offering cost competitiveness. The US and Africa are other target destinations of corporate India, the chamber said.

''Riding on strong balance sheets, good credit ratings and confidence shown by global business community, Indian manufacturing is leading India Inc's global quest,'' said Assocham President Venugopal Dhoot.

The driving forces are huge funds supply, globally competitive business practices, favourable regulatory environment besides higher margins, revenue, volumes, and growth prospects, he added.

The analysis noted that boost will be provided by pharmaceuticals and automobiles particularly in terms of value, though IT is still likely to dominate as far as the number of deals is concerned.

The number of outbound M&A deals has increased sharply over the past six years from about 37 in 2001 to more than 170 in 2006.

The transactions gathered tremendous momentum in 2005. Total number of deals actually doubled in 2005 from 2004 to reach a figure of close to 150 from 70 in the previous year. Though inbound deals are also increasing, the outbound deals are growing with much more vigour. The number of inbound deals in 2006 grew to 532 from 224 in 2001.

Identifying the competitive advantage of Indian companies, the global private equity funds are extremely bullish on India Inc's shopping spree. They have expressed faith in the ability of Indian companies to use the technology that the target company possesses.

The domestic skills of scaling up in the foreign market at a cheaper cost are also playing a key role in cementing the confidence.

The sectors attracting investments by corporate India include -- metal, pharmaceuticals, industrial goods, automotive components, beverages, cosmetics and energy in manufacturing; and mobile communications, software and financial services in services.

The industrial houses which are upbeat on inorganic growth are the Tata Group, Bharat Forge, Ranbaxy, ONGC, Infosys and Wipro among others.

Year 2007 has already witnessed two mammoth transactions of Tata-Corus and Hindalco-Novelis. The former deal of over 12 billion is the largest acquisition by an Indian company ever.

Barely after ten days of this historic moment, Aditya Birla Group's Hindalco Industries Ltd announced another big-ticket deal worth six billion dollars.

India is setting stage to play imperative role in energy sector too. Suzlon Energy Ltd, the world's fifth largest wind turbine manufacturer by annual installations, is leading the way.

It has offered 1.3 billion dollars for Germany's REpower. In another development Bharat Petroleum Corporation Ltd signed a farm-in agreement for acquiring 20 per cent participating interest in an Australian block AC/P32 in the Timor Sea area for 1.42 billion dollars.

UNI