Continuous downfall in the stock market has led the current market valuation of corporate India''s mergers and acquisitions losing behind by a whopping $24.04 billion, in just four years time. During 2005-08, listed Indian companies have been involved in M&A activities worth $45 billion, but the current mark-to-market value of such M&As is down to $20.96 billion, with a loss of 53 per cent, SMC Capital said in a report. Though M&As are meant more for long-term strategic reasons, a loss of $24.04 billion is lot of money to totally ignore. However, the overall M&A experience by Indian corporates turning sour, raising questions about the very rationality of such aggressive M&As, SMC Capitals CEO Jagannadham Thunuguntla said.
Fast and aggressive M&As by Indian corporates on unprecedented bull market, 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.
Nearly 85 per cent 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 per cent 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 per cent), Banking, Financial Services and Insurance (44.09 per cent), energy (37.07 per cent), hospitality (75.72 per cent), IT and ITeS (57.87 per cent), manufacturing (62.71 per cent), media and entertainment (78.66 per cent), oil and gas (16.81 per cent), pharma and healthcare (67.10 per cent).
Fast and aggressive M&As by Indian corporates on unprecedented bull market, 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.
Nearly 85 per cent 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 per cent 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 per cent), Banking, Financial Services and Insurance (44.09 per cent), energy (37.07 per cent), hospitality (75.72 per cent), IT and ITeS (57.87 per cent), manufacturing (62.71 per cent), media and entertainment (78.66 per cent), oil and gas (16.81 per cent), pharma and healthcare (67.10 per cent).
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