INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

INDIA INC FOREIGN M&AS TREBLE TO $2.6B

  THE robust global stock markets in the past two years have led to a spurt in M&A activity across the world with cross-border M&A rising by 88% in 2005 to $716 billion. The number of deals rose by 20% to 6,134.

   This has been the overwhelming spur for the total FDI inflows globally, which has risen 29% to $916 billion in 2005.

   Reflecting the country's growing clout in the global corporate arena, Indian companies acquired assets worth $2.6 billion in overseas firms during 2005, compared to just $863 million a year ago. In terms of inward FDI potential index, India's rank has slipped by one notch to 82. China is ranked 33 on the index.

   The World Investment Report 2006, released by United Nations Centre for Trade and Development (Unctad) on Monday, has said national security issues are dominating the recent wave of M&As. This is because, “Many of the most controversial M&As have involved Chinese companies”.

   This has happened as these bidding companies often had close ties with their home country government. The report acknowledges that deals often get reviewed in countries like the US, as “it is often feared that motives other than economic ones drive bids by state owned companies in energy, infrastructure services or other industries with a security dimension”.

   But even in India, it points out, “security concerns were behind the decision of the government of India to block a bid by Hutchison Whampoa, for a container terminal in Mumbai”.

   Referring to the Mittal-Arcelor deal, it says the € 26.9-billion deal was opposed by some European politicians, who “alluded to the risks due to the developing country origins of the bidding company”.

   In terms of international ranking, Indian companies continue to remain fringe players in the list of top transnational corporations, with only ONGC figuring among the top 100 from developing countries at 26th position.

   Ranked in terms of foreign assets, General Electric is the world's biggest TNC, while Hutchison Whampoa leads the list of companies from developing countries. The top financial sector TNC in the world is GE Capital services, which displaced Citigroup from the top.

   The regions that witnessed the highest FDI inflows — over 70% — were Africa and West Asia. The Asian region broadly saw over 20% growth in FDI inflows. Predictably, China was the single biggest FDI recipient among the developing economies and the surprise this time was the UK taking the top position as FDI recipient among the developed economies.