Contrary to the global trend, India has been witnessing another wave of merger and acquisition (M&A) activites in the mining sector. Replenished balance sheets, burgeoning cash stockpiles, limited growth options and rising capex costs have contributed to the trend, say experts.

According to a recent Ernst & Young report, while deal values plummeted for the second year in a row across the globe, India was one of the few countries that witnessed increased deal activities, in terms of both value and volume in the sector. Indian metal and mining companies completed 16 deals worth $981 million in 2009, an increase of 45% in deal count and 173% in value as against 2008.

Vedanta Group performed the biggest Indian acquisition of 2009 through its subsidiary Sesa Goa by buying Dempo?s mining assets for $370 million.

Navin Vohra, partner, metals and mining practice, E&Y, said: ?In India, the key driver for striking deals was resource security and backward integration across the supply chain. Although the global transaction market in 2010 will remain challenging and mega deals will be scarce, we expect to see growth in the number and size of deals.?

The quest of Indian energy companies for thermal coal to cater to electricity demand, the interest of Indian steel companies in domestic coal deposits and iron ore mines and the desire of domestic and international steel firms for backward integration by acquiring downstream processing units largely fuelled the deals in 2009.

M&A transactions were subdued in the first half of the year, as companies focused on de-leveraging and conserving cash for operations. Activities picked up as the economy stabilised and liquidity improved.

In 2009, multiple hostile bids for Orissa Sponge Iron by at least three different steel companies is perhaps the first occasion where domestic steel majors have fought with each other to acquire a domestic iron ore asset.

The year also saw $258-million acquisition of Shree Precoated Steel by Essar Group followed by acquisition of Uttam Galva by ArcelorMittal to tap the Indian market.

According to the E&Y report, the biggest global acquisition was done by China?s Yanzhou Coal Mining Co. of Australia?s Felix Resources for $ 2.6 billion. Of the top 10 state owned enterprise transactions in the sector globally in 2009, 6 were Chinese.