Core sector drives M&A in India

The combined spending on the core and infrastructure sector by both the public and private sectors accounted for about 5 per cent of gross domestic product (GDP) in India in 2007. The sector was also the favourite playground for deal makers last year. The core and infrastructure sector saw transactions worth $40 billion (Rs 1.6 lakh crore) from 89 deals, representing 78 per cent of the total value of $51-billion or Rs 2,04,000 crore (675 deals) M&A activity in India during the year. This was 10 times the value of all deals in the whole of calendar year 2006.

M&A activity in 2007 Sectors               Deals ($ BN) Core Sector            40 IT & IT-enabled      2.8 Pharmaceuticals      1.4 Others                   6.8

According to IndusView, an India-focussed cross-border advisory firm, there is considerable juice still left and M&As in the sector this year are expected to rise 35 per cent to $54 billion (Rs 2.16 lakh crore). “The sector is buoyed by the growing demand for worldclass urban lifestyles and infrastructure facilities. This will attract investments of $500 billion (Rs 20 lakh crore) over the next five years,” says Bundeep Singh Rangar, Chairman, IndusView.

Within the core sector, metals & alloys led the M&A activity, accounting for 43 per cent of deals ($22 billion or Rs 88,000 crore). The other sectors that contributed significantly to M&A activity are information technology & ITES and pharmaceuticals, with deals worth $2.8 billion (Rs 11,200 crore) and $1.4 billion (Rs 5,600 crore), respectively.

A significant aspect of the recent M&A activity has been India Inc.’s global ambitions, which touched a new high, with overseas acquisitions (outbound) worth more than $32 billion (Rs 1,28,000 crore), which is twice the value of acquisitions made by overseas companies in India (inbound). Total cross-border deals (inbound and outbound), at $48 billion (Rs 1,92,000 crore) in 2007, were more than three times the corresponding figure for 2006.

— Pallavi Srivastava