AVERAGE URBAN TELEDENSITY CROSSES 100% MARK

Close on the heels of celebrating 500 million mobile customer mark, the country’s cellular phone market has now crossed another major landmark: The average urban teledensity in India has now crossed the 100 per cent mark as per latest figures released by the department of telecom (DoT). This implies the country’s towns, cities and metros, all of which are classified as ‘urban’ by the government, now have as many mobile connections as that of their population. In March 2008, the country’s urban teledensity was about 60 per cent, which jumped to over 85 per cent in March 2009 and it has now crossed the 100 per cent mark.

The Economic Times

INDIA SHATTERS MONTHLY MOBILE SUBSCRIBER RECORD

India added new mobile phone subscribers at a furious pace in January after telecom service provider Reliance Communications launched a new network. The nation increased its mobile subscriber tab by a monthly record high 15.4 million people in January, up from the previous record, 10.8 million, in December, according to the Telecom Regulatory Authority of India (TRAI).

Network World

OUTLOOK 2009

India is among the top 10 countries with an optimistic economic outlook for year 2009, according to a year end poll conducted by a global market information company TNS Gallup International. Two out of five people expected the coming year to be better than 2008.

The optimistic outlook mirrors the expected growth in the various sectors including India’s Information Technology sector, which is on track to achieve its aspired target of $60 billion in software and services exports and $75 billion in overall software and services revenues by 2010. Consumer finance sector at $45 billion in India that grew by 28% last year is expected to maintain its growth with the revival of the housing loans segment owing to the government's initiative of extending lower interest rates. The healthcare sector is expected to grow to about $75 billion by 2012 from the present $35 billion market size. The sector growing at 42% annually, accounts for 5.2% of the GDP, making it the third largest growth industry in India.

The $34 billion Indian automotive sector is expected to continue to grow at more than 15% as oil prices dip and companies announce the launch of new vehicles. The world's fastest-growing mobile phone market that adds more than 9 million new customers each month is driving the $31 billion telecom industry to be worth $54 billion in 2012. See ‘Special Report’ on the Indian Telecommunication sector.

Domestic growth is expected to attract and benefit from foreign direct investment (FDI) of $40 billion in the next financial year, which is twice the amount received during the first half of the current financial year.

Such growth forecasts, however, are accompanied by challenges that might just derail the country from its growth trajectory. These include internal pressure groups as in the case of the Indo-U.S. nuclear agreement that witnessed intense opposition by the Left Parties within India’s ruling coalition government called the United Progressive Alliance (UPA). Similarly, the delay in the small car project of Tata Motors’ ‘Nano’ due to widespread unrest from a regional political party led to the project being scrapped from its original site in Singur, in the east Indian state of West Bengal compounds existing impediments of slow infrastructure development, widespread illiteracy, poverty and corruption - impediments India must overcome if it wants to sustain and accelerate its economic growth.

Core and Infrastructure Sectors Dominate Deal Street in 2007; Garner Transactions Worth $40 billion with 78% Share

--- Core Sector Deal Street sets ground for 2008; Expected to lead the table in 2008 with deals worth $54 billion

--- Overall M&A highlight the India-Europe corridor that witnessed 63% share in cross-border deals at $30 billion

“India has a long way to go before Mumbai resembles Shanghai, or New Delhi rivals New York. India consistently under-spends on new infrastructure even as its existing patchwork of roads, railways, airports and power & energy providers struggle to cope with India’s burgeoning economy - and population.” says Bundeep Singh Rangar, Chairman of IndusView, the India-focused cross-border advisory firm.

The Year 2007 has gone down well as the year of ‘The Core and Infrastructure Sectors’ with the deal street transactions grossing about $40 billion from 89 deals, which is 10 times the value of deals in the sector in the whole of calendar year 2006. That represents 78% of the total value of $51 billion from 675 deals.

“The focus towards the sectors is buoyed by the growing demand for urban lifestyle and world class infrastructure facilities which have been under pressure to come up to global standards. This augmentation is expected to cost and attract investments to the tune of $500 billion over the next five years.” added Rangar

“The need for world class infrastructure to accelerate growth in the Indian economy to 10% will see the application of internationally applicable best practices, experienced global management expertise & technology and inflow of a resource base of incremental funds. A part of this capital resource is expected to find its way in to mergers & acquisitions (M&As) worth $54 billion in the core and infrastructure sectors in 2008, a growth of 35% compared to 2007.” said Rishi Sahai, Board Director, IndusView.

The combined spending on core and infrastructure sectors by both the public and private sectors accounted for about 5% of Gross Domestic Product (GDP). That pales in comparison with China that spends about 11% of its GDP for infrastructure development.

The Indian government has responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2012. Estimates suggest that a third of this investment will come from the private sector, presenting an unprecedented investment opportunity, with corresponding inorganic activity.

Among the core sectors, Metals & Alloys led M&As accounting for deals worth $22 billion and share of 43% in the total deal value, followed by Power and Oil & Gas sectors grossing $5 billion with a share of 9.8% of the deal value. Telecommunication sector emerged the second most consolidating sector with $11.3 billion and 22% of the total deal value. The other sectors which have significantly contributed to the M&A activity was Information Technology (IT) & IT enabled Services and pharmaceutical with deals worth $2.8 billion and $1.4 billion with 5.6% and 2.8% share in M&A deal values, respectively.

The key high value deals included Tata Steel’s acquisition of U.K.’s steel manufacturer Corus Group Plc for $12.2 billion, Hindalco’s acquisition of Novelis Inc for $6 billion and Vodafone’s acquisition of majority stake in Hutchisson Essar for a price of $10.8 billion topped the tables. These were followed by Suzlon Energy Ltd’s acquisition of German wind turbine company REpower Systems AG.; Algoma Steel Inc., Canada based an integrated primary steel producer, by India’s Essar Steel Ltd; and PT Kaltim Prima Coal, Indonesia's largest coal exporter by Tata Power Company Ltd, India’s largest private sector electricity generating company

Cross Border Deals

Significant aspect of the recent M&A activity has been India Inc.’s global ambitions which touched a new high with overseas acquisitions (outbound) worth more than $32 billion, which is twice the value of acquisition made by overseas companies in India (inbound). It also shows the exponential growth in cross-border deal activity at $48 billion in 2007, more than three times achieved in the whole of year 2006.

Trade between India and Europe is expected to multiply five times to $100 billion by 2010 from current level of $20 billion, according to industry estimates. Acquisitions by Indian companies in Europe accounted for 52% of the total acquisitions made overseas worth $16 billion, with the U.K. contributing about 39% of the overseas deal value, ahead of the U.S. at 32% amounting to about $12.5 billion and $10.5 billion, respectively.

Europe dominated the inbound deal activity as well, notching up a share of 89% of the inbound deal value of which the U.K. constituted about 80% of the deal value.

“Indian and the U.K. companies are seeking to unlock the potential in emerging economies on one hand and harnessing the size and scale of global operations on the other. The acquisition of Hutchison Essar Ltd by the U.K.’s Vodafone Group Plc and the acquisition of the U.K.’s largest steel maker Corus Group Plc by India’s Tata Steel Ltd are two such cases in point.” said Rangar

The investments by India Inc. in Britain during the fiscal year 2006-07 has created 5,130 jobs, second to the U.S., according to the U.K.’s Department of Trade and Industry. In terms of the number of new projects, India has been ranked third with 69 new projects, after 540 new projects of the U.S. and 95 new projects of France.

Indian investment in the U.K. had gone up 111% to 76 projects, creating almost 4,000 jobs during 2005-06. The Indian investment has contributed $67 million (£33 million) to the London economy in 2006-07, according to Think London, an agency promoting investment into the city.