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Why overseas M&A options are off India Incs menu for now

Sourav Majumdar Dec 21, 2011

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#CorporateStrategy#Grant Thornton#India Inc#M&A#strategy

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Indian companies for whom inorganic growth was a key element of strategy are doing a rethink. New acquisitions have becomewell-nigh impossible owing to a series of problems.

There are worrying signals for mergers and acquisitions (M&As). While some brave mid-sized companies may still be scouting

around for buyouts overseas, the general consensus is that Indian companies will be cutting back on acquisitions in the coming year.

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y overseas M&A options are off India Incs menu for now | Firstpost http://www.firstpost.com/business/why-overseas-ma-options-are-off-in...

11 24-12-2011 09:42


2/11

ith interest rates being where they are in India, funding

an acquisition today is a very tough proposition. Reuters

Already, trends suggest that M&A figures in 2011 have been lower than that in the previous year. A report in The Economic Times

quoting Grant Thorntons estimates says that outbound deals this year have fallen rather dramatically to just over $10 billion from $22

billion-plus the previous year, as concerns over imminent economic slowdown hit India Inc.

While investment bankers are continuing to engage with the top brass

of those companies which had either announced acquisitions going

forward, or were planning strategic buyouts overseas, privately most

agree that the M&A option is now virtually out of India Incs growth

plans.

Says a top executive at a frontline global investment bank: With

interest rates being where they are in India, funding an acquisition

today is a very tough proposition. The market will not take kindly to

companies which do so.

Some companies among them Marico and Thermax have already

put their M&A plans on the backburner, according to The Economic

Times report. Some mid-sized companies, which had made public their

M&A plans, are also likely to join the ranks, senior investment

banking sources toldFirstpost.

Even if dollar funding was a less expensive option, given the

exchange rate, even that is also turning out to be a huge problem, saidanother investment bank head. Add to that the mark-to-market (MTM)

hit (where the market values of acquisitions are written down), and there is likely to be a major hit on the market valuations of such

companies as shareholders will likely vote with their feet if companies take such risks in these times, investment bankers explained.

Companies may cry themselves hoarse that these MTM hits will be reversed over time, but no one will listen in these times.

Companies will, therefore, have to wait and watch to avoid a further leveraging of their balance sheets as the cost of money still

remains at higher levels. Investment bankers reckon that only those companies, for whom some smaller acquisitions overseas make

strategic sense, will be brave and still go ahead with their plans.

If its a missing piece in an overall strategy for, say, an engineering or technology company, then it may still make sense. Otherwise,

clearly not, said one banker. Even in such cases, only smaller acquisitions will make sense. Companies which made $100 million

acquisitions will now be looking at buys of much smaller sizes and that too only for strategic reasons, if such buys are part of an

immediate strategy.

Further, investment bankers point out that companies will also be better off waiting rather than going for overseas buyouts since,

given the widely discussed policy paralysis, they wouldnt risk even smaller acquisitions when the policy-making environment is

fraught with confusion.

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#Newstracker

Despite poor demand in real estate,prices refuse to go down

Dec 23, 2011 0 Comments

The real estate market in India is an ideal

example of the subversion of demand-supply

economics.

#AXIS Bank Ltd#BSE Sensex

#Business/Finance#Jean Dreze

#NewsTracker#Pranab Mukherjee

#RealtyBites

Investors are realtys mafia; thats

why prices cant come down


Property prices are weak but given the

structure of the industry, there is no real hope

that prices will come down to affordable

levels

#FSI#Knight Frank#Liases Foras#property

prices#Realty Bites

#NewsTracker

Yes Bank joins the bandwagon, hikes

NRI deposit rates to 9.6 pct


Private lender Yes Bank said it will raise

interest rates on fixed deposits held by

non-resident Indians (NRIs) to 9.6 percent

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11 24-12-2011 09:42


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HDFC Bank raises the bar, offers 9%

interest on NRE deposits


The Reserve Bank of India deregulated

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interest rates on non-resident external rupee

deposits and ordinary non-resident accounts to

provide greater flexibility to banks to attract

dollars.

#HDFC Bank#NRE#Private banking

#private lender#RBI

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