Zee Biz Smart Investor Feb 24, 2009 India Incs M&A Value Dips 53% In 4 Yrs
India Inc's M&A value dips 53% in 4 yrs
Posted: 2009-02-23 16:40:27+05:30 IST
Updated: Feb 23, 2009 at 1640 hrs IST
New Delhi, Feb 23: The blood bath in the stock market has pulled down the current market
valuation of corporate India's mergers and acquisitions by a whopping USD 24.04 billion, in just
four years time.
During 2005-08, listed Indian companies have been involved in M&A activities worth USD 45
billion, but the current mark-to-market value of such M&As is down to USD 20.96 billion,
indicating a loss of 53 percent, SMC Capital said in a report.
quot;Though M&As are meant more for long-term strategic reasons, a loss of USD 24.04 billion is lot
of money to completely ignore.
Nevertheless, the overall M&A experience by Indian corporates turning sour, raising questions
about the very rationality of such aggressive M&As,quot; SMC Capitals CEO Jagannadham
The unprecedented bull market, which encouraged Indian corporates to make brisk, aggressive
M&As, was also one of the key reason for fall in its valuations, as during the four-year time
(2005-08) the equity market went through a rough patch.
A yearly comparison shows that the listed M&As of 2005 are performing relatively better with
current mark-to-market return of negative 6.68 per cent.
However, the listed M&As of 2006, 2007 and 2008 are bleeding severely with losses as high as
62.84 per cent, the report said.
The loss in the M&A space was across the board, except telecom, which posted healthy returns of
21.76 percent, while the biggest loser was the auto sector, which gave negative returns of 81.23
quot;At a time when many high profile M&A deals such as Tata SteelCorus, Tata Motors-Jaguar &
Land Rover, Suzlon-REPower have seen significant wealth erosion, Telecom emerged as the only
stand out industry with healthy returns posted in the transaction of Vodafone's investment into
Bharti,quot; it added.
Nearly 85 percent of the listed M&As during 2005-08 are posting losses. There were 54 deals in
the period under review, out of which as many as 46 are in losses.
Only eight deals representing 15 percent have been able to post profits and these deals were
from sectors like energy, manufacturing, oil and gas and telecom.
Deals that reported profits were NTPC-Ratnagiri Gas, GAIL-Ratnagiri Gas, Vodafone-Bharti, Tata
Power-Arutmin, Holcim-HCC, Bharat Petroleum-Encana, Indian Oil-IBP Company.
All the other sectors under review, barring telecom, that posted negative returns are aviation
(69.94 percent), Banking, Financial Services and Insurance (44.09 percent), energy (37.07
percent), hospitality (75.72 percent), IT and ITeS (57.87 percent), manufacturing (62.71
percent), media and entertainment (78.66 percent), oil and gas (16.81 percent), pharma and
healthcare (67.10 percent).