A 20-month rupee rally, rapid infrastructure development and falling borrowing costs have driven clear growth in Indian M&A in recent months, according to Phoenix Legal partner Abhishek Saxena.
According to Saxena, up until eight months ago, M&A action was “a bit muted” despite the high fund activity taking place in the Indian capital market. “Of late, greater certainty and greater confidence in the economic recovery process has convinced investors that the trend of activity increase in terms of Indian outbound investments is here to stay,” he said.
This view is backed up by data released by Bloomberg earlier this month, which reported that Indian companies were paying an average 28% premium on M&A transactions above the share prices of their targets – the highest among the BRIC nations.
“India’s outbound has moved up several notches to the top five countries doing outbound FDI into the US. Overall at the economic level, there has been a growing trend in volume as well as in the number and size of deals. Inbound M&A was slow until about eight months ago, but now gradually, one is seeing increased M&A activity, even within India,” Saxena told ALB in an interview.
Saxena believes that Indian companies have grown more aggressive with the appreciation of the rupee against the dollar and other currencies and now have “more legroom” to bid above the target price.
Reliance Industries, India’s biggest company by market value proved to be the most aggressive, having closed six deals in the US with a total value of US$946m. The company, together with Bharti Airtel, led US$39.6bn worth of cross-border deals by Indian companies this year – the most since Bloomberg started collecting data in 1998 and up from just US$2.8bn in 2009.
“BRIC countries are where maximum growth is being witnessed. Therefore [being here] makes sense for any company wishing to be in a jurisdiction that offers good opportunities for strong continual growth,” he said.ALB
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