India Inc explores options to acquire companies abroad

Indian corporations with robust stability sheets have shaken off the shock from the coronavirus pandemic to chase abroad acquisitions, hoping to select up engaging property whose valuations have been hammered by the virus.

While the pandemic has dragged India’s outbound deal quantity down 23% this 12 months, there have been indicators of a restoration in latest weeks. Renewable power firm Greenko Inc., as an example, is within the race to amass NEC Energy Solutions, a struggling US-based battery maker, Mint reported on Thursday. A day earlier than, the UK’s SKY News reported that Mukesh Ambani’s Reliance Retail Ventures Ltd is eyeing bankrupt retailer Debenhams.

To make sure, Reliance has denied that it’s taking a look at Debenhams.

The ramifications of the disaster on companies haven’t been uniform. Software providers, medicine and packaged-food business have both remained unscathed or caught the tailwind. Software providers corporations, for instance, have seen demand for cloud computing and cybersecurity providers rise after the pandemic. They have moved swiftly to fill within the gaps of their portfolios by small acquisitions. “There will be interest as there is financial distress, and assets will be available for cheap. However, it will be very selective. Companies or groups with strong balance sheets or companies backed by private equity funds could look at such overseas acquisitions,” stated Anuj Kapoor, managing director and head of funding banking at UBS India.

While the pandemic has introduced many alternatives to amass abroad corporations at misery valuations, Indian corporations are usually not speeding to purchase them, and only some are anticipated to have the funds and the boldness to make the most of this, given the delicate international financial restoration is threatening to stall amid a resurgence of coronavirus instances. Also, Indian corporations have not often made giant abroad acquisitions previously few years, as their purchases within the go-go years earlier than the worldwide monetary disaster hit unravelled quickly. Since then, marquee offers comparable to Tata Steel Ltd’s acquisition of Corus or Hindalco’s acquisition of Novelis have not often been repeated.

Except for 2018, when corporations acquired property overseas value $12.9 billion, outbound M&As have slid into the gradual lane, reveals Refinitiv information. According to Kapoor, sectors comparable to pharma and chemical compounds, that are seeing important investor curiosity, might probably look to increase abroad. “For PE-owned firms, it could be a step towards eventual monetization. If a tuck-in acquisition makes business sense and improves the marketability of the company eventually to a strategic or financial investor, they may evaluate M&A,” he added.

The cash-rich expertise sector has been essentially the most acquisitive. Companies comparable to Infosys, HCL Technologies and Tech Mahindra have made abroad acquisitions. Just final week, HCL introduced the acquisition of Australia-based IT options supplier DWS Ltd for round $137 million.

Sector bellwether Tata Consultancy Services Ltd can also be scouring for acquisition alternatives. In an April interview, chief working officer N. Ganapathy Subramaniam stated whereas TCS will not be concerned about pure workforce augmentation, it’s searching for corporations with a complementary buyer base with some mental property and patents. The firm will even look into alternatives that may result in market growth, he stated.

“IT firms are cash-rich…and keep acquiring overseas companies to build capabilities in weak areas. So, deals in digital, cloud and SaaS (software as a service) space keep seeing healthy activity,” stated Ajay Garg, managing director at Mumbai-based i-banking agency Equirus Capital.