Will it be a policy war soon between the Indian central bank/government and the big boys of
India Inc? Concerned over the
rupee’s stumble and a record current account deficit, the
Reserve Bank of India wants Indian companies to seek prior approval for any direct investment abroad that exceeds their net worth. But the 100% cap is not likely to thwart their appetite for
overseas acquisitions as most of the fast-growing firms have significantly enlarged their balance sheets and can close big deals without much sweat. The weakening rupee has not been too much of a disincentive either, as the flagging
economy of the
US and Europe means good assets at realistic pricing
So how many companies have gone shopping abroad in the current financial year starting from April 2013 and how much money has flowed out? In April-June 2013, the aggregate disclosed value of
outbound deals amounted to $5.1 billion, according to Ernst & Young. However, outbound bids totalled only $2.8 billion in the July-September quarter – a 47.2% fall from the previous quarter, a Mergermarket report stated.
We still don’t have official data regarding the number of
outbound M&A deals for the first two quarters of the current financial year. But a close look at some of the big-ticket and strategic deals, done by the famous and not-so-famous companies, will certainly give you a clear insight into the current trends. Some of these deals happen to be smaller, softer and less risky takeovers, but they all add up. Still, the nagging question remains – will these initiatives drive growth in the long run or simply lead to undesirable dollar outflow?
