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MORE MARKETS, LESS GOVERNMENT
Table 3: Cross-Border Mergers And Acquisitions By Indian Firms
Year Purchases Sales
No. of deals Value No. of deals
Value
(Million $)
2000 55 910 111 1219
2001 35 2195 84 1037
2002 35 270 66 1698
2003 57 1362 83 949
2004 64 863 80 1760
2005 91 2649 126 4210
2006 133 4740 163 6716
Source: FDI Database, UNCTAD
have also made sizeable overseas investments.
Large Indian companies in industries
such as steel and chemicals
have also begun to ‘internationalize’ by
acquiring upstream companies, for instance,
in countries like, Australia and
Canada. 18 In the energy sector, India’s
State-owned groups, such as ONGC
Videsh, Indian Oil Corporation and Oil
India, have acquired stakes abroad in
exploration, refining and retailing.
Table 3 presents a snapshot of Indian
firms’ purchases and sales in the form of
cross-border Mergers and Acquisitions.
It shows that the number of Indian companies
investing abroad has been steadily
rising and in some of the years, the
value of outbound deals was more than
the value of in-bound deals.
Presently, systematic information on
cross-border M&As by Indian companies
is not available from any government
agency. Therefore, in this paper,
we rely mainly upon a study on Indian
Acquisitions Abroad by MAPE Advisory
Group 19 and refer to some other
sources as well. According to the said
study, Indian companies acquired 244
foreign companies over the period 1st
January 2000 to 31st March 2006.
Table 4 shows the sectoral distribution
of the 244 acquisitions by Indian
companies covered by the MAPE study.
The software and business process outsourcing
industry saw the largest deal
count, followed by pharmaceuticals and
automotive. In terms of the value of the
acquisitions, however, Manufacturing
sector dominated with more than 40
percent of the acquisitions in industries
such as pharmaceuticals, automotive,
consumer goods, chemicals, fertilizers
and metals; whereas software and business
process outsourcing accounted for
almost 30 percent of the total value of
acquisitions during this period. The
largest number of Indian acquisitions
was in North America and Europe accounting
for (approximately) 34 percent
and 40 percent of the total, respectively.
This reiterates the fact that Indian companies
are investing more in the developed
economies. The MAPE Study
also reports that a certain degree of
concentration can be found among the
Indian firms that made these acquisitions
abroad. Out of the 244 deals, 163
deals involved Indian companies which
have made more than one acquisition
abroad. For instance, ONGC made a
total of 9 acquisitions and Ranbaxy has
made 8. The other main players include
United Phosphorous, Bharat Forge, Dr
Reddy’s, Tatas, HCL Tech, Mahindra &
Mahindra and Nicholas Piramal,
among others.
This outbound M&As activity by Indian
firms has continued to increase.
The year 2007 has already witnessed
two major acquisitions of Tata-Corus
and Hindalco-Novelis. The former acquisition
by Tata Steel was worth over
$12 billion, which has been the largest
acquisition ever by an Indian company;
whereas the latter by Aditya Birla
Group’s Hindalco Industries was worth
$6 billion.
5. Driving Factors And Motives
For Overseas Investment
The recent wave of outward FDI from
India has been boosted by both domestic
and international factors. In some
In some industries such as pharmaceuticals, import substituting
industrialization regime (of the pre-1990s era) had
encouraged local technology and skill development and
also created capacities and abilities in Indian firms which
enabled them to become cost competitive globally
cases, industry specific factors have also
favoured the outward FDI. As regards
the domestic factors, the policy regime
on outward FDI from India has been
liberalized significantly since 2003; a
liberalised investment regime has provided
Indian firms with easy access to
cheap credit from both domestic and
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