create an emerging markets telecoms giant may have
fallen through, but it did herald the return of corporate India to the international market. Reliance
Industries’ bid to take over LyondellBasell, one of the
world’s largest polymers and petrochemicals companies (now in Chapter XI proceedings) further estab-lishes Indian companies as serious contenders in the
global M&A space.
Acquisitions will be more carefully considered
in line with well-crafted growth strategies.
Indian companies making overseas acquisitions
will be faced with the challenge of infusing
corporate culture across the newly merged
cross-border organisation.
A number of Indian companies have strong balance sheets and access to necessary funding to
finance their acquisitions. Liquidity in the Rupee market means Indian banks are willing to lend and Indian
companies are increasingly (and successfully) looking
to Indian banks for their funding requirements, when
they previously might have looked offshore.
There are also a number of Indian corporates (
particularly in the IT and pharmaceutical sectors) and
entrepreneurs (who benefited, in the years preceding
the crisis, from the high-valuations and general
appetite amongst multi-nationals and private equity
houses to increase their India exposure) with the
resources to satisfy their appetite to diversify away
from India. For instance, cash-rich IT companies
which were previously cautious of inorganic growth
are now considering expanding through strategic
overseas acquisitions. In terms of definite trends, the
last six months evidence a great interest in outward
investments from the IT and retail sectors – investment banks view this as a continuing trend.
Outbound activity in the infrastructure and industrial sector is expected to pick up momentum towards
the end of this year. Africa is proving to be of particular interest for acquisitions by Indian infrastructure
and natural resources companies. This is partly
because of the ability of Indian corporates to operate
INDIA
in a low-cost and complex environment (given India’s
own peculiarities) and partly because of lower valuations alongside greater opportunities in Africa when
compared to other highly-priced, saturated markets.
Distressed assets and non-core businesses have,
and will in the short to medium term, also provide
interesting investment opportunities to expand capacity, consolidate market share or gain a foothold in a
new market. Indian companies have been prominent
in these sale processes, even though many have not
been successful.
CHALLENGES FOR INDIA INC.
There will be a rise in outbound investment activity.
However, Indian companies are likely to adopt a
more cautious approach to overseas acquisitions.
Acquisitions will be more carefully considered in line
with well-crafted growth strategies. Indian companies making overseas acquisitions will be faced with
the challenge of infusing corporate culture across the
newly merged cross-border organisation. Assembling
and deploying a management team with the expertise and experience necessary to successfully integrate the acquired businesses is no easy task as some
Indian companies have found out in the past, and
this will have to be a top priority among senior
management. O
Authors:
Sandeep Katwala
Partner and Head of the India Group,
Linklaters LLP
London
Tel: + 44 20 7456 5972
Email: sandeep.katwala@linklaters.com
Zebaysh Hirji
Associate, India Group
Linklaters LLP
London
Tel: + 44 20 7456 3123
Email: zebaysh.hirji@linklaters.com
www.linklaters.com
