india going global.indd - The IIPM Think Tank

IN FOCUS
If they can successfully do that, then they have got cost
rationalization, but there is no one in the market who would
say today that they have paid a cheap price. If Indian companies
want to buy companies which are cheap, then they
are looking at companies that are not hugely profitable or
not profitable at all. So the result of that is, they are not
buying either a very healthy company or by buying a less
profitable company, they take the earnings per share dilution
upfront.
One World:
The other aspect is the growing prominence of the cross
border deals which highlight the growing intimacy between
two economies or regions. The acquisition of Hutchison
Essar Ltd by the U.K.’s Vodafone Group Plc reinforces the
reciprocity between Indian and the U.K. companies seeking
to unlock the potential in emerging economies on one hand
and harnessing the size and scale of global operations on the
other as shown by the acquisition of the U.K.’s largest steel
maker Corus Group Plc by India’s Tata Steel Ltd.
Indo-Europe Trade:
• Indo-Europe trade by 2010 to touch $100 billion from
$20 billion currently
• Indo-French trade to touch $10billion by 2010 from $3.5
billion currently
• India among top 10 investors in U.K. in 2006-07
• No. of Indian companies in London : 500
• Listed companies : 30
• New Projects financed : 69
• New jobs created : 5,130
• The largest proportion of outbound acquisitions (Indian
companies acquiring companies overseas) have been in
Europe - 57% of deal value this year
Indo-U.S. Trade:
• Trade volume of $30 billion in 2006-07
• U.S. accounts for 16.8% of Indian exports and 6.3% of
its imports
• India-U.S. bilateral trade expected to double by 2009
• North America accounted for 34% of the outbound
acquisitions this year
• 46 outbound investment deals from India to the U.S.
amounted to the total value of more than $2 billion
during the financial year 2006-07
• 48% of the deals were in the Information Technology
(IT) and IT-enabled Services (ITeS) Pharma & Healthcare
accounted for 9% and Gems & Jewellery registered
7% deals
• Indo-U.S. Nuclear deal expected to open a lucrative
market for nuclear energy equipment makers
Trade between India and Europe is expected to multiply
five times to $100 billion by 2010 from current level
of $20 billion, according to industry estimates. Propelling
this growth is increasing merger and acquisition activity
between companies in the two regions. Acquisitions by
Indian companies in Europe accounted for 57% of the
total acquisitions made overseas so far this year amounting
to about $16 billion, up from just $4 billion in whole
of last year.
The investments by India Inc. in Britain during the fiscal
year 2006-07 has created 5,130 jobs, second to the U.S., according
to the U.K.’s Department of Trade and Industry.
In terms of the number of new projects, India has been
ranked third with 69 new projects, after 540 new projects
of the U.S. and 95 new projects of France.
Further, an India-strategy for a global company in the
overall business plans takes precedence in its inorganic
growth as well. A point highlighted in the recent acquisition
by French IT services company, Groupe Steria of U.K.-
based Xansa Plc., which has more than 5,000 employees in
India out of its total headcount of 8,000.
The deal follows the footsteps of the acquisition by
Capgemini SA, Europe’s biggest computer-services company
of Rosemont, Illinois-based Kanbay International Inc.,
provider of IT services for banks and financial institutions
for $1.25 billion in the last week of October 2006. The
combined entity today has about 17,000 employees in India,
representing 22% of Capgemini’s total workforce.
Sectors to Watch
Information Technology:
It is difficult to ignore a market that offers the best of the
three key location-based advantages: a skilled workforce,
lower costs and growing domestic market.
India’s information technology (IT) and IT services industry
became the most consolidating industry with 97 mergers
and acquisitions (M&A) deals worth almost $3 billion last
year. This year so far the sector has already witnessed 75
M&A deals, a growth of 22% when compared to the corresponding
period last year worth more than a billion dollars
in just half a year matching the deal making last year.
Going ahead, we are expecting to see continued growth
in the IT services sector. Software and related services exports
are expected to touch $21 billion in 2007, a growth
of 21.6%. Business process outsourcing is also expected to
increase by 34% to reach at $12.6 billion in 2007.
Automotive Sector:
The Indian automotive sector, characteristically driven
by traditional and conservative business conglomerates is
under-going a fundamental shift as companies set out to
unlock the benefits of global scale of operations exhibited
by the increasing merger & acquisition (M&A) deals in the
40 Need the Dough July-October - 2007