Well begun, but US recession fears to hit Indian firms' foreign M&As

Bankers bullish on local acquisitions by India Inc in rest of FY23

In spite of a good start in the June quarter of the current year with $100-billion transactions, acquisitions by Indian companies overseas are expected to slow down in the rest of the financial year due to fears of a recession in the US  and difficulty in raising funds overseas. But bankers said top-rated Indian companies will continue to acquire companies within India due to availability of attractive opportunities.

Statistics collated by this newspaper shows that in the June quarter, India Inc signed 807 transactions worth $100-billion, which is three times higher than $30.3 billion worth of 641 deals signed in the June quarter of the previous fiscal. The deals would have been 40 per cent higher than June quarter of last year, but the $57-billion merger between HDFC Bank and housing finance firm HDFC announced in April this year led to increased acquisition activity. The $10.5-billion acquisition of Holcim’s India assets, Ambuja Cements and ACC by the Adani family in May this year also led to higher M&A activity.

“I don’t think top-rated Indian companies will have any issues raising funds. Even if there is any recession in the United States, it would benefit local companies as there would be outflight of capital from the US and mainly to India and certainly not to countries like China and Russia due to geo-political situations,” said Prabal Banerjee, former group finance director, of the Bajaj Group.

Recently, while abandoning the sale of its pharmacy retail unit, Boots UK in Europe, American retail major Walgreens Boots Alliance blamed the dramatic change in the international markets for its move. The company said as a result of market instability severely impacting financing availability, no third party was able to make an offer that reflects the high potential value of Boots and No7 Beauty Company. “Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses,” Walgreens said in a statement. Reliance Industries was the bidder for Boots UK, along with the private equity major, Apollo Global Management.

Experts said as foreign acquisitions become difficult, the foreign direct investments (FDI) and portfolio investments (FPI) will start moving into India — being the highest growth market in the globe. “

Bankers said some of the top companies are studying acquisition opportunities in India. 

The JSW group is conducting a due diligence on Mytrah Energy and a decision is expected in the next two months. Minerals major NMDC is planning to sell off its steel plant in Chhattisgarh for enterprise valuation of up to $4 billion, which will see India’s top steel companies making the bids. The sale of Metro Cash and Carry is also expected to be announced soon.