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DC* Updates Vol.21 June 2013
DC* Updates
Vol.21 June 2013
• M&A in India - 2013……………………...……………..……...……….…… 3
• Deal Watch………………………..……………..………………………………...13
• Global Business and Finance Scenario……………………..…………. 14
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Contents
DC Updates Vol. 21 July 2013
Outbound Deals
The quest for growth has spurred a number of Indian companies
to look beyond Indian borders, over the last couple of years. The
outbound investments by Indian companies have almost tripled
as compared to the last decade. The main factor driving
overseas investments is the search for revenue growth through
new markets and capabilities, knowledge and assets, and
product diversification. 8 Indian companies now feature in the
Fortune Global 500 list.
In 2012, India's outbound M&A value totaled US$11.2billion, a
68.5 per cent jump from last year. Acquisitions are helping
Indian companies to scale up quicker and emerge as significant
players on the global stage.
Pharmaceuticals
DC Updates Vol. 21 July 2013
Outbound and Inbound M&A in India - 2013
Trending Sectors
Inbound Deals
Inbound deals have also improved over the past several years,
with foreign companies eyeing the huge demand for
consumption owing to India’s large population.
In the last quarter of FY12-13 alone India witnessed inbound
transactions worth US $1.66 Bn. A total of 39 inbound
transactions took place during this period. Unilever and Diageo
were two global majors who have invested in India’s
consumption theme.
Retail Healthcare
IT
DC Updates Vol. 21 July 2013
So Far
2013 YTD Total deal Value – US $10.9 Bn No of Transactions – 130 Inbound growth - 190.4% (against Q1 2012) Outbound Growth – 732.6% (against Q1 2012)
Deal Announcement Date
Bidder Company Target Company Seller Company Value (US $ Mn)
27-Feb-2013 Mylan INC
Agila Specialties Private Limited; and Agila
Specialties Asia Pte Limited
Strides Arcolab Limited 1,600
28-Feb-2013 Cipla Ltd Cipla Medpro South
Africa Ltd Cipla Medpro South
Africa Ltd 548
4-Mar-13 First Pacific Company Limited; and Manila
Electric Company
GMR Energy (Singapore) Pte Ltd (70% Stake)
GMR Group 537
22-Feb-13 Shriram Group Pvt Co Orient Green Power
Company Limited (60.99% Stake)
Orient Green Power Company Limited
337
13-Jan-2013 Li & Fung Limited Lornamead Group
Limited Jatania Family 190
DC Updates Vol. 21 July 2013
M&A Growth – Outbound vs. Inbound
Outbound M&A
Trending Sectors (2013) Energy Mining and Utilities Industrials
2346
638 624
22
20
9
0
5
10
15
20
25
0
500
1000
1500
2000
2500
Q1 2011 Q1 2012 Q1 2013
Value (in US Millions) No of Deals
13155
3824
2205
39 39
30
0
5
10
15
20
25
30
35
40
45
0
2000
4000
6000
8000
10000
12000
14000
Q1 2011 Q1 2012 Q1 2013
Value (in US Millions) No of Deals
Inbound M&A
Trending Sectors (2013) Pharma, Medical & Biotech Industrials & Chemicals Energy Mining and Utilities
DC Updates Vol. 21 July 2013
India – Outbound M&As
India Outbound Deal Market
ONGSC and Oil India’s acquired 10% stake in Rovuma gas field
in Mozambique for US $2.5 Bn
Apollo Tyres’ bid for Cooper Tyre and Rubber – Largest
acquisition target in the US soil by an Indian bidder at US
$2.5Bn
In the Pipeline
Aditya Birla Group and state-owned Coal India are
considering bids for Rio Tinto’s Australian coal assets
Rupee depreciation has not slowed down the growth of
outbound M&A as the foreign banks directly fund the
acquisitions.
Source – Times of India and Reuters
DC Updates Vol. 21 July 2013
Motivations for Overseas Merger
Preference by lenders
The abundant liquidity in the US is one
of the major reasons behind many
overseas takeovers . Banks are taking
advantage of ample liquidity and low
interest rates in the US and investing
them elsewhere with higher returns.
In search of greener pastures
Indian companies are searching abroad
with the economy growing at its slowest
pace in a decade. A sharply weaker rupee,
which touched a record low last week, is
also forcing companies to try and boost
dollar earnings
Foreign banks are fuelling
Indian Companies’ recent
burst of overseas takeover
bids by offering US$ loans
at lower interest rates.
Regulatory Concerns
Few projects, in areas such as Metals and
Mining have been experiencing delays due
to environmental and regulatory concerns.
To avoid such delays and costs associated
with it, Indian businesses are looking
overseas where these approvals are more
easier to come by.
DC Updates Vol. 21 July 2013
Foreign Currency Earnings – With the rupee constantly depreciating a lot of Indian companies are trying to take advantage of this situation by boosting their foreign currency earnings.
Access to Raw Materials – Mining and Power Generation companies in India have been looking at overseas mines to secure raw material supplies and increase the quality of their inputs.
Overcoming Regulatory Hurdles – Some industries have suffered constant regulatory changes and court rulings. To counter the ill effects of such regulations, Indian companies look to other markets
Technological Synergies – Few Indian companies have looked to buy high technology product or service to gain exposure to new technologies, in spaces such as Cloud Computing, Natural Gas Exploration and Extraction etc.
Diversifying– Indian markets has suffered one of the lowest growth in the last decade. In order to make their business more geographically diversified, Indian Companies are looking abroad.
Why Overseas acquisition makes sense
DC Updates Vol. 21 July 2013
India Inbound Deal Market
M&A deal value in the Pharma, Medical & Biotech space
more than tripled from Q1 2012 (US$ 0.4bn), making it the
biggest contributor to Indian M&A by value this quarter.
Mylan’s offer for two of Strides Arcolab’s subsidiaries was the
largest deal this quarter at US$ 1.6bn that accounted for
55.1% of the aggregate deal value in India.
Unilever raised its stake in HUL to 67.28% from 52.48% via a
open offer which was accounted for at US $ 3.2 Bn
Source – The Hindu and Reuters
India – Inbound M&As
DC Updates Vol. 21 July 2013
Motivations for Inbound Merger
Mission - Rural India
It’s not just India’s urban population that
are buying more products. Per-capita
spending by non-urban population grew
faster than that of urban dwellers for
the first time in two and a half decades,
according to S&P’s Indian unit Crisil Ltd.
Market Transformation
Indian consumers are expected shift from
mom-and-pop stores to global retailers
and bigger brands, according to a report
published by global consulting firm
Deloitte.
India has always been a domestic consumption driven market rather than a export market. Huge consumption has lead to a series of takeover in retail and consumption space. However, it is not the only space where deals are happening – Hospitals, IT, Pharmaceuticals have seen lots of deal activity this year and this trend is expected to continue.
Unmatched Volumes
India, because of its sizeable population,
cannot be ignored. India is offering a great
opportunity for companies to be part of
the volume growth which is hard to find in
other parts of the world
DC Updates Vol. 21 July 2013
Volumes – Volumes play a very key role in bringing foreign players to India, relaxation of FDI norms and close to US$ 500 Bn worth of retail transactions play a huge role in motivating foreign companies to look to India.
Demographic Factors – More number of younger population makes it favorable for retail business. With rural India joining the consumption bandwagon, the opportunities are expected to multiply in the coming years.
Demand for Healthcare – India is also a huge market for medical products and services and this has been a strong motivation factor for many takeovers in the pharma space. May deals in this space are expected to be consummated in the second half of 2013
Relaxation of FDI norms – The much awaited Relaxation of FDI in sectors such as retail provides a great opportunity for foreign retailers enter the market.
Why Indian acquisition makes sense
DC Updates Vol. 21 July 2013
Final Points
The 1st quarter of 2013-14 has been one of the best in recent
times for the Indian M&A in terms of value. Weak rupee did
not deter Indian companies with strong balance sheets and
access to relatively cheaper dollar loans to acquire assets
abroad.
Easier access to foreign funds and has also been one the
predominant motivations behind outbound acquisitions.
India’s search for natural resources has driven many PSU’s
abroad mainly owing to factors such as delay in getting
environmental and regulatory approvals, quality of the
resources etc.
According to news reports, companies in IT and Manufacturing
are looking to acquire targets abroad to counteract the
sluggishness in the domestic economy as well as to diversify
their risk. Indonesia, Africa and Australia have been top
destinations for Indian PSUs looking for natural resources.
Indian companies are also looking at Middle East and East
Asian markets for acquisitions.
Inbound deals have also been growing at a relatively slow pace
this year. These deals have been mainly driven by factors such
as change in FDI and the government’s push for more FDI in
various sectors such as aviation and defence .
Strong depreciation of the rupee against the dollar has made
the acquisitions cheaper for foreign companies looking to
buyout a company in India. Weakness of rupees is expected to
continue over the next few quarters according to analyst
estimates and as a result of which the inbound transactions are
expected to increase in the short term
Healthcare and Retail are the most sought after sectors owing
the fact that the former’s revenue is expected to increase as
healthcare spending in India increases. Retail industry however
is unorganized and foreign companies are looking to bridge the
shortcomings of the unorganized sector.
Deal Watch
Engineering
Energy
IT/ Technology
DC Updates Vol. 21 July 2013
Eka Software Acquires stake in Matrix Group
AurionPro Sells E2E Infotech to CameronTec
Minjar Cloud Solutions acquires Adepto
Ibibo Group acquires Redbus
OpenTable acquires JustChalo
Clearstone backed Games2Win acquires
Backyard Game FactorRy
Lyxel Digital merges with AdFedral; Plans Fund
Raise
Snapdeal buys Sequoia Backed - Shopo.in
Media / Telecom
Liberty Media may acquire Stake In Airtel's DTH Biz Fiberweb to acquire Terram India HT Mobile buys Webitude Sistema to buy NTT DoCoMo's stake In Tata Teleservices OnMobile Global acquires Livewire Mobile
Temasek backed Sembcorp to invest in
NCC Power Project
Kalindee Rail sells stake To Texmaco
Rail.
Sika Buys Texsa India
Citi Venture to acquire stake in Sansera
Engineering
Amtek acquires majority stake in JMT
Auto
ENOIA acquires Babcock Borsig Softech
NeST Group acquires Tyco's Indian Unit
Jain Irrigation to exit Its Wind Power Biz DLF Sells Its Gujarat Wind Power Project to BLP Vayu
Hospital / Food/ FMCG
Elder Pharma Acquires Max Healthcare Shree Ganesh Jewellery Raises Funds From Progruss Investments Balaji Wafers may sell majority stake to one of global food majors Delhivery Buys Cash Collection Service From Gharpay
Global Business and Finance Scenario
DC Updates Vol. 21 July 2013
Asia and Oceania
• Joint action is in store as Japan targets 2% inflation
• Upbeat Indian market is due for more earnings results
• Confidence rises among businesses in China
• China's wealth gap remains dangerously wide
• SE Asian nations are seen emerging as winners from Japan's
stimulus
• China GDP clocks in at 7.9% growth for 4th quarter
• India sees plunge in FDI; Moody's maintains rating
• Weak yen and strong Chinese GDP boost Asian-Pacific
markets
• Road to redemption The industry is starting to revive
Americas and Canada
• The last great American airline merger…and the last great
American airline bankruptcy?
• GM - Now it’s time to step on the gas
• Offshoring- Here, there and everywhere - After decades of
sending work across the world, companies are rethinking
their offshoring strategies
• Hefty legal costs affect Citi and BofA's Q4 profit
Europe
• Eurozone economy is seen contracting; Greece might need more
funds
• U.K. is expected to mark triple-dip recession
• The euro-zone crisis: Time to celebrate? Government-bond
markets in peripheral countries are soaring
• Economists don't expect eurozone growth
International
• Squeezing the sleazy
• News adventures
• Horribly rotten, comically stupid.
• Some websites require registration to read articles. All
the articles are owned by the respective owners.
Thank you
Vignesh Shankar Director and Principal Consultant
Hand phone : +91 94455 66386
K.J.Dandeker Executive Director
Phone : +91 4425220721
DC Updates Vol. 21 July 2013
