Saturday, October 18, 2008

India Inc Walks Away From M&As - Oct 18, 2008

India Inc saw quite a number of acquisitions in the last few years, but as the investor sentiment has turned negative in the world economy, the Indian companies can be seeing walking away from large global deals. The change in the trend is evident from the fact that Sterlite Industries is reviewing its planned $2.6 billion bid for Asarco. Infosys, too, walked away from its $800 million Axon deal recently. There could be many reasons for the change in the investor sentiment. There is a significant demand contraction in all sectors and also in output cutbacks, resulting in pricing power loss. With the financial crisis still raging, funding either via debt or equity has also become scarce.

Meanwhile, Tata Steel that bought Corus for a massive $12 billion also has to face the steel downturn with Corus cutting production. Hindalco is struggling to repay the $3.03 billion bridge loan the company had taken.
Moreover, JLR has also resorted to plant shutdowns following the demand slowdown. Mergers and Acquisitions (M&A) experts, however, have their doubts about India Inc being able to reap the expected returns on these mega acquisitions.

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