Deal Street eyes busier new year after Rs 2 tn M&As in 2012

Dec 25 2012, 15:46 IST
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Year 2012 began on bullish note, but deal activities fell significantly in the second and part of 3rd qtr. (Reuters) Year 2012 began on bullish note, but deal activities fell significantly in the second and part of 3rd qtr. (Reuters)
SummaryYear 2012 began on bullish note, but deal activities fell significantly in 2nd and part of 3rd qtr.

of equity capital and high cost debt, fewer Indian corporate ventured overseas to buy businesses.

"Moreover the business plans of companies operating in the developed markets were themselves shaky making it riskier for Indian corporate to do overseas acquisitions," Singh said.

Experts are of the opinion that the creation of the positive business and deal making sentiment need to continue in 2013 as well which would bring International Investors back to the India story, which still is one of the fastest growing economies globally.

"In the past few months, Indian markets have moved up with a few large issuances coming to market. While this trend is expected to continue next year, overseas investors could remain cautious about India's ambivalent policies, controversial government and inflationary risks," merger market's Piramal said.

Inbound deals suffered a decline this year owing to moderation in the India growth rates, lack of government reforms and tax regulations (relating to GAAR and retrospective amendments) coupled with the global economic weaknesses. While 2011 witnessed M&A inbound deal value of USD 29 billion, so far this year it stood at USD 7 billion.

Interestingly, 2012 saw outbound deal value rise to USD 14 billion, from USD 10 billion worth deals in 2011, despite economic weaknesses.

This was largely on the back of large deals in the oil and gas space (ONGC's outbound investment in Kashagan oilfield Ņ USD 5 billion), Rain Commodities acquisition of Rutgers (USD 0.9 billion), Piramal's acquisition of Decision Resources Group (USD 0.7 billion) and GMR Energy's reverse merger with UFS, Singapore (USD 0.6 billion).

The rise in internal mergers and restructuring was largely driven by the Sterlite-Sesa Goa's USD 12 billion deal.

Grant Thornton's Harish said the rising debt levels of Indian corporates and concerns on debt servicing (especially in sectors like infrastructure, aviation, retail) have triggered Indian promoters to unlock cash by way of M&A of their non-core and sometimes core assets like the Pantaloon-Aditya Birla Group deal and United Spirits deal with Diageo.

The sectors likely to see more significant revival in M&M momentum in 2013 include retail, telecom, information technology and healthcare.

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