Indian capital goods companies look to acquire US companies, form JVs: Deloitte

Indian companies, particularly in the capital goods sector, are looking at the US to be a base for manufacturing for markets like the US, Canada, Mexico and Latin America, and are actively scouting for acquisitions in the fields of technology, according to Deloitte Touche Tohmatsu, a global consulting firm.

Infrastructure major Larsen & Toubro already has its eye on the US markets. Given the opportunity in shale gas in the US, and various challenges in extraction, transportation and storage, the company told Business Today late last year that the US market showed significant opportunities, though the company didn't share long-term acquisition plans.

"You will see more scenarios of Indian companies making an investment in the US, taking advantage of pro-business public policy, water, lower-cost energy and the shale gas boom and building a finished product that is sold either in the US, or Mexico, central/south America, where the logistics cost for a product will be much cheaper than trying to do it here," said Gary Coleman, Managing Director of Global Industries at Deloitte. He didn't share any names.

Most of these are expected to happen through joint ventures with US companies, he added, which can be managed through the partner who knows the market rather than by the Indian investors as opposed to wholly-owned subsidiaries.

Among industry groups, the capital goods industry is looking at acquisitions in the US, said Coleman. There is a need for technology in various areas including in electromechanical parts that use mechanical motion to carry out electrical operations,  where Indian companies urgently need to upgrade in order to compete with global players. These companies are on the lookout for technology or brands, new customers and expansion in scale.

These companies will trail Indian automakers, which have already taken a lead. Mahindra & Mahindra already gets a significant portion of its revenue from the US. It has plans to export electric two-wheelers from its manufacturing facility in Southeast Michigan in the USA, according to reports. Some companies such as auto components manufacturer Motherson Sumi have decided on two or three technology areas where they are focussed on building expertise, Coleman said.