Indian investments to US cross $2 bn in 2006-07

New Delhi, June 17: Indian investments to the US have touched the two billion mark in 2006-07 with IT and ITeS sectors accounting for 48 per cent of the total deals, and is likely to cross 10 billion dollars by 2010.

Driven by factors like increased profitability, cost advantage and a liberal regulatory stance of the government, a total of 48 overseas deals were done in 2006-07.

Apart from the major deals by big companies, a lot of small and mid-sized deals contributed somewhere between 20-60 million dollars.

Greater activity is expected in this band in the coming years, states a joint study by FICCI and Ernst and Young (E&Y).

The year's costliest investment overseas was by Tata Tea Ltd of Energy Brands Inc for a sum of 677 million dollars. ONGC stood next with a 425 million dollar investment in Omimex de Columbia.

Tata Coffee Ltd also acquired Eight O'Clock Coffee company in a 220 million dollar deal.

Indian outbound deals or global Mergers and Acquisitions crossed 15 billion dollars in 2006 which earlier stood at 4.3 billion dollars in 2005.

Indian companies announced 115 foreign acquisitions valuing 7.4 billion dollars in the first nine months of 2006 itself, says the study.

These corporate forays are not confined to a small number of sectors but are spread across industries ranging from pharmaceuticals to telecom, automobiles and ancillaries to IT, paints and paper.

''Most Indian companies are underleveraged, that is they do not have much debt, so they can borrow greater amount of money, giving them stronger investment options,'' FICCI Secretary General Amit Mitra said.

The chamber also believes that there is an increased willingnes to take risks which has helped the companies enter the US market.

Another important development has been the relaxation of investment norms by the Apex bank. ''The RBI has been understanding.

The recent decision to allow investment of 300 per cent of net worth overseas is another commendable measure. The bank understands the needs of the global market,'' he said.

The world has woken up to the Indian success story. With the GDP growth stabilising at over 9 per cent, the world has started taking Indian investors seriously.

The need to have a presence in the US market has been always there. But with Indians acquiring higher stakes in foreign companies, the future seems bright. ''Europe and Asia still remain the main contributors but its is worth noting that the US share is also increasing,'' Dr Mitra said.

The US invested 5.5 billion dollars between 1991 and 2006, a period of 15 years, but India invested two billion in just a year, he added.

This will add to value addition. ''The trend is bent towards brand buying. Thats the place where the maximum volumes are coming from,'' he added.

Research and Development will also benefit as we see a lot of pharma companies going to the US. And those who feared the loss of American jobs will also be able to breathe easy as it will generate a lot of jobs.

The auto sector along with the manufacturing sector also seems to have a good potential in the US market.

The appreciation of rupee will only help the Indian acquisitions as they turn out cheaper for the country, Dr Mitra.

UNI