If you closely observe some of the foreign acquisitions that Indian companies have sewed this year, the emerging markets focus comes out loud and clear. Interestingly, it also cuts across sectors. In the consumer goods space, Godrej Consumer Products bought Nigerian personal care company Tura. Fortis? acquisition of Singapore-based hospital chain Parkway and telco Bharti Airtel?s Warid buyout in Bangladesh and play for African operations of Kuwait-based Zain gives a hint of Indian companies? services sector appetite. Pharma company Strides Arcolab is taking over the Brazilian facility of the South African company Aspen. And in commodities, Brazilian acquisitions by Shree Renuka Sugars (Equipav SA) and government-run National Mineral Development Corporation (Ferrous Resources) complete the picture.

Deal statistics, in numbers and value, hitherto skewed in favour of developed markets which even till last year accounted for over two-thirds of all Indian outbound M&A activity?will start reflecting this shift towards developing markets soon. Out of the 28-odd outbound deals by Indian companies in the first two months of 2010, almost a fourth involve an emerging markets company. To be sure, Indian companies will continue to look at developed markets for technology or intellectual property-related competence building deals, but given these markets? anaemic growth forecasts for the next couple of years, it would be difficult for anyone to make money, even at the current ?low? valuations being quoted for some targets in countries like the US, the UK or the Euro zone.

There is a combination of factors that is pushing Indian companies towards markets in Africa, South America, South Asia and South East Asia. For one, as growth returns with a bang after almost a year or so of the slowdown, India Inc finds itself relatively cash-rich and debt-free as compared to its recession-hit global peers. With valuations rising from the troughs that had dipped because of recession, many not-so-strong emerging market companies see value in finding a suitor, and equally some ambitious Indian companies are looking to consolidate quickly. Fortunately, the return of the feel-good factor has so far not clouded Indian companies? objectivity in deal-making and they seem to be sticking to ?value buying?, though a strong consumption-led domestic growth in markets like Africa, South Asia, South East Asia and Brazil even makes a case for some premium on valuation. But more importantly, Indian companies are also looking for deep synergies in these emerging markets acquisitions. And it is here, in leveraging synergies between the target and acquirer, that makes or mars any M&A that India Inc?s emerging markets focus plays to its strength. The relatively uncluttered consumer markets of Africa, South Asia and South East Asia, compared to Europe or the US, are a beacon for any marketer. However, what makes the case stronger for Indian companies is that the contours of these markets favour business models they have perfected for decades.

Much like India, Africa remains a low-cost, high-volume, geographically fragmented and relatively unbranded market, in anything from soaps and medicines to mobile airtime. This is just the market where Bharti Airtel?s ?minutes factory? business model for airtime may find traction and thrive. For commodity players like Shree Renuka and NMDC, resource-rich emerging markets will increasingly play a critical role in keeping their operations cost-competitive, even while serving Indian consumers. The risks inherent in valuations et al in emerging markets commodity M&As, especially for mineral acquisitions, seem worth taking as other countries, mainly China, remain aggressive acquirers here, driven by their policy of treating natural resources as strategic buys. Moreover, labour laws in much of Africa, and even in South East Asia, remain benign compared to developed markets. Doing business in developing markets is more pliable for Indian companies, many of whom are finding the developed world?s stringent labour laws a huge put-off.

It is said that policy creates markets, and nothing can be truer in the context of India Inc?s ?Look East? policy, which seems to be gathering pace of late. The ground has been laid with a bevy of free trade and comprehensive economic agreements between India and South East Asian nations. With the lowering of tariff and non-tariff barriers on the movement of goods and professionals in the region, it was about time that services businesses, much like Fortis, start building a pan-Asian business. Even though Parkway is Singapore-based, over two-thirds of its 3,600 hospital beds are outside the island state in places like Malaysia, the UAE, Brunei, China and India. It is in these, outside Singapore, markets that Fortis will perhaps look for aggressive growth. India Inc?s emerging markets M&A story is getting stronger by the day.

shailesh.dobhal@expressindia.com