CII Communique July 2011

corporate indiam & a1st National M&A SummitCreating A FacilitativeRegulatory EnvironmentThe M&A Summit discussed the impact of thechanging regulatory landscape while learningfrom India’s largest acquisitionsfor maximum value creationM e r g e r s a n dAcquisitions (M&A)are one of the largestcontributors to the Indiangrowth story. CII organized itsfirst ‘National M&A Summit'on 23 June in Mumbaito discuss a facilitativeregulatory landscape thatwould provide furtherimpetus to M&A, and sharebest practices in global M&Atransactions. The day-longSummit discussed theimpact of the changingregulatory landscape whilelearning from India’s largestacquisitions for maximumvalue creation.Talking about the changinggovernmental and businessmodels in the country, Mr DK Mittal, Secretary, UnionMinistry of Corporate Affairs,(MCA), described M&A as anintegral part of the ecosystemfor the functioning of afree economy. Explainingthat in India regulationof M&A is done under afew fundamentals, he saidthat the Government hasbeen careful not to put anyM&A: The Prevailing ScenarioA total of 1,131 M&A deals were announced in Indiabetween April 2010 and March 2011, with a cumulativedisclosed value of US$62 billion. This reflects asignificant increase of 60% over FY10, which recorded1,385 deals with a disclosed value of US$39 billion.Few but large deals are back: FY11 is seeingincreased deal value and large billion-dollar deals(12 as against just 3 in FY10), despite a reducednumber of deals. This can be primarily attributed to asignificant rise in valuations in the Indian market dueto ascending market capitalization. Easy access tofinancing, as well as ample liquidity, have facilitatedan increase in deal sizes.Resurgence of cross-border deals: Nine of the top tendeals announced in FY11 are cross border in nature.India clocked 552 cross-border deals worth US$52.4billion, reflecting a significant 84% share of the totaldeal value in FY11. Inbound deal activity constituteda 68% share, and outbound deal activity constituteda 32% share in terms of deal value.Natural resources rule: Of 12 billion-dollar deals, 7were recorded in the natural resources sector — 5in oil and gas, and 2 in metals and mining, primarilybecause of rapidly increasing commodity prices. Thetwo sectors cumulatively accounted for approximately49% of the total M&A deal value in FY11. Financialservices, retail and consumer products, technologyand industrial products were the most active sectorsin terms of deal count. Together, they accounted forapproximately 44% of all deals in FY11.Source: CII-E&Y paper: Transactions 2011 –Setting the stage for the next era of M&Arestriction on acquisition byIndian corporates outsideIndia. The Securities andExchange Board of India(SEBI) and the CompetitionCommission of India havenorms to regulate thetakeover of Indian companiesby foreign companies, wherecapital is much cheaper.The idea is that regulationshould not be restrictiveor destructive and that theregulatory framework shouldhave a soft landing, whichthe Government has beenable to achieve, he stated.Mr Mittal said his Ministrywas aligned to the needsof the corporate sector andone of its key jobs is to bringharmony among variousregulators and reduce theproblems faced by business.On the issue of reportingstructures by differentregulatory agencies, he saidthe MCA, SEBI and RBI areon the same page in termsof reporting requirements,and if anything is changed, itwill be changed for all three.He gave the assurance that30 | July 2011 Communiqué