RELIANCE INDUSTRIES POTENTIALLY ACQUIRES LYONDELLBASELL AMIDST RECESSION LED PURCHASE PRICE

The potential purchase of a controlling stake in LyondellBasell Industries AF, the world’s third largest petrochemical company, by Reliance Industries Ltd, India’s largest company by market capitalization, marks a return to multi-billion dollar overseas acquisitions by cash-rich Indian companies tempted by depreciated asset prices of companies affected by the biggest worldwide recession since the Great Depression. If successful, it could make Reliance Industries India’s first company to have a market value greater than $100 billion.

Indian companies with a war chest of cash reserves include the Oil and Natural Gas Corporation Limited (ONGC), India’s state owned petroleum company, with reserves of about $5 billion; Reliance Industries with reserves of $4.2 billion and Tata Sons, the holding company for all Tata Group’s investments, with about $640 million .

Indian companies are on the hunt for bargain basement prices overseas. This is a good time for them to buy market share and customers in the West at fraction of what they would have paid a couple of years ago.

After a lull of about 18 months, Indian companies have aggressively started looking at foreign assets again. During that time, western economies dipped to low single-digit GDP growth and unemployment surged into double digits amidst the worst banking industry led financial crisis in decades. By contrast, the Indian economy continues to grow at nearly 7% annually amidst growing consumer demand and a robust banking system.

The fear that India’s economy might follow the West into a recession is over. That’s giving Indian companies the confidence to go hunting again in overseas markets where the recession gives them one-in-a-lifetime opportunities to acquire depressed assets.

LyondellBasell, based in Rotterdam in the Netherlands, sought bankruptcy protection early this year after demand for its plastic products plunged last year.

The acquisition of LyondellBasell by Reliance is expected to be India’s biggest cross-border deal this year, on par with the acquisition of the U.K.’s top steel maker Corus Group Plc for $12 billion by India’s Tata Steel Ltd in January 2007. Indian M&A activities peaked in 2007 with more than $51 billion worth of transactions.

India has been host to 234 M&A deals amounting to only about $8 billion during the first 10 months of this year, less than a third of that in the corresponding period in 2008.

The $100 Billion Club
The Reliance – LyondellBasell combine will accelerate Reliance into the elite league of companies worldwide that have a market capitalisation of more than $100 billion (Rs 460,000 crore). The combined entity will have potential consolidated revenue of more than $85 billion, transcontinental presence across more than 60 facilities and 60,000 people. Reliance Industries currently has a market value of about $75 billion.

The Indian companies are buying international scale and growth not only in developing economies, but to compete in developed economies as well. Reliance’s acquisition of LyondellBasell will mark India’s entry in the international petrochemical industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.

Indian oil companies are stepping up overseas purchases as shrinking profit margins have prompted international refiners to idle and sell plants. Crude oil currently trades at about half its record $147.27 a barrel in July 2008.

Essar Oil, India’s second-largest private refinery is currently in talks to buy three refineries in the U.K. and Germany from Royal Dutch Shell Plc. Oil & Natural Gas Corp., India’s biggest energy explorer, completed a 1.4 billion-pound ($2.3 billion) acquisition of Imperial Energy Plc in March.

INDIA'S BILLION DOLLAR CLUB ADDS 51 FIRMS; $500 BILLION

The rally in the stock market and the recent appreciation in rupee value has brought 51 new members to the elite billion-dollar market-value club, while doubling its overall valuation since October when the benchmark index had dropped below the 8,000-level.

The country boasts of as many as 144 companies with a market capitalisation of at least a billion dollar at present. The number represents a increase of 51 companies from just 93 in October 2008. Interestingly, the cumulative market value of the club currently stands at about 900 billion dollars (Rs 42,34,171.25 crore) as on June 5, more than double of its value in October last year of 410 billion dollars (about Rs 20,41,029.8 crore).

The Economic Times

47 INDIAN COS AMONG FORBES GLOBAL 2000 LIST

As many as 47 Indian companies, led by corporate behemoth Reliance Industries and the country's biggest lender, State Bank of India, have made it to the list of world's biggest 2,000 companies by US magazine Forbes.

The Economic Times

First Three Quarters Of Indian M&As Top $26 Billion

--- Cash rich Indian companies’ overseas acquisitions worth $14 billion outpace their global counterparts that made acquisitions worth $8 billion in India

--- Infrastructure Sector Dominates Deal Street with transactions worth $12 Billion

--- Power, Oil & Gas top grosser with merger & acquisitions (M&As) worth $5 billion; Ninth India-EU Summit sets ground for future deals in Nuclear Energy

--- Banking & Financial Services and Pharmaceutical sectors follow with M&A deal values of more than $3 billion each

--- Overall M&As highlight the India-Europe corridor that witnessed 52% share in total cross-border deals worth $22 billion

Cash rich acquisitive Indian companies are set to make new acquisitions as target companies are significantly cheaper now than just six months ago. The cache of cash as an acquisition currency has also increased as global recessionary trends have driven stock prices worldwide to historic lows.

The acquisition of Citigroup's captive Business Process Outsourcing (BPO) arm Citigroup Global Services (CGSL) for $505 million by India’s largest IT services exporter Tata Consultancy Services - the largest buyout of a foreign captive BPO in India; the acquisition of the U.K.’s Imperial Energy Plc, one of the leading oil companies with assets in Russia by India’s ONGC Videsh Ltd, a subsidiary of India’s biggest explorer Oil & Natural Gas Corporation (ONGC) Ltd for $2.8 billion; the pending purchase of Axon Group Plc, the U.K.-based provider of SAP implementation consulting, that has invited rival bids from India’s second largest IT services company Infosys Technologies Ltd and HCL Technologies Ltd., are all manifestations of an M&A binge fueled by large cash reserves held by Indian companies.

Indian companies with a war chest of cash reserves, such as Infosys Technologies Ltd, India’s second largest IT services company, with reserves of about $2 billion; ONGC Ltd with similar reserves; Tata Sons, the holding company for all Tata Group’s investments, with reserves and surplus of more than $2.5 billion, among others, have become active acquirers in the market. This has happened as the US Standard & Poor's 500 Index has tumbled 33 percent in its worst yearly slump since 1937.

Infrastructure Dominates

Infrastructure-related industries dominated mergers and acquisitions (M&As), accounting for 45% of the deals at more than $11.8 billion of the total deal value of $26 billion this year to September.

“The traction in the infrastructure M&As is symbolic of the need for world class facilities, adoption of internationally applicable best practices, experienced global management expertise & technology applications to accelerate growth in the Indian economy. To get that resource base of incremental funds and expertise, part of the capital is expected to find its way in to mergers & acquisitions (M&As).” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, Europe’s fastest-growing Indian mergers and acquisitions firm.

The Indian government has responded to an urgent demand for new infrastructure targeting to spend 9% of the country’s GDP 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.

“The focus towards the sector is buoyed by the urgency to match 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 power sector has been the main stay of the M&As this year within the infrastructure sector, which accounted for $5 billion, or 42% of the deal value in the infrastructure sector. The power sector commanded 19% share in the total M&A value of $26 billion this year compared with about $4 billion last year representing a 7.4% share of the total deal value of $51 billion.

The power sector witnessed two deals worth more than $1 billion – acquisition of the U.K.’s Imperial Energy Plc, one of the leading oil companies with assets in Russia by India’s state owned oil company ONGC Videsh Ltd, subsidiary of Oil & Natural Gas Corporation (ONGC) Ltd for $2.8 billion; and the acquisition of InterGen NV, a Dutch power company by Indian infrastructure company, GMR Infrastructure Ltd.

“The recently concluded ninth India-European Union summit in Marseille, France is expected to further accelerate the M&A activity in the power sector as it’s focus turned towards the potential of nuclear energy to the growth in trade between the two regions, which is targeted to reach €100 billion ($140 billion) over the next five years.” added Rangar

Among the infrastructure sectors, the power sector was followed by telecommunication sector that emerged the second most consolidating sector with $3.75 billion, a share of 32% in the infrastructure sector deal value and 14% share in the overall M&A deal value.

The other sectors which have significantly contributed to the M&A activity are Banking & Financial Services and Pharmaceutical sectors with M&A deal values of more than $3 billion each. These sectors were followed by the Automotive Sector with deal value of about $2.5 billion.

Some of the big ticket deals during the year to September included, the acquisition of

· The U.K.’s Imperial Energy Plc, one of the leading oil companies with assets in Russia by India’s state owned oil company ONGC Videsh Ltd, subsidiary of Oil & Natural Gas Corporation (ONGC) Ltd for $2.8 billion

· Jaguar and Land Rover, the U.K. based iconic marquees of the U.S.-based Ford Motor Company by India’s Tata Motors Ltd for $2.3 billion

· Tokyo-based pharmaceutical company Daiichi Sankyo Company Limited’s acquisition of Ranbaxy Laboratories Ltd, India’s largest pharma company for $2.4 billion

· HDFC Bank Ltd, one of India’s leading private sector banks acquisition of its domestic rival Centurion Bank of Punjab for $2.38 billion

· Investment $2 billion in Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Italy-based Telecom Italia SpA

Cross Border Deals

“Significant aspect of the M&A activity has been India Inc.’s eyes on global opportunities, which have become more prominent in the backdrop of the global recession.” explains Rangar

India Inc.’s overseas acquisitions (outbound) worth about $13.8 billion, outnumbering the value of acquisitions made by overseas companies in India (inbound) at more that $8.2 billion. Continuing the trend which peaked last year, cross border M&As this year too had a distinct European flavour.

Four of the big ticket overseas deals by Indian companies were in Europe. Acquisitions worth more than $2 billion were of Imperial Energy Plc and Jaguar & Landrover. The deals worth about $1 billion were acquisitions by Great Offshore, India's integrated offshore oilfield services provider of Cayman Island based SeaDragon Offshore Ltd; and the acquisition of InterGen NV, a Dutch power company by Indian infrastructure company, GMR Infrastructure Ltd.

Trade between India and Europe is expected to touch $100 billion by 2010 from current level of $80 billion, according to industry estimates. Acquisitions by Indian companies in Europe accounted for 58% of the total acquisitions made overseas. Europe also accounted for 45% of the inbound deals (deals by overseas companies in the country) in India, led by the acquisition of stake in Unitech Telecom by Telecom Italia.

The U.K. has been the main centre of investments with two of the big ticket deals of Imperial Energy Plc and Jaguar & Landrover by Indian companies. The third deal, that of Axon Group Plc, the U.K.-based provider of SAP implementation consulting, which features a competitive scenario between India’s second largest IT services company Infosys Technologies Ltd and its domestic rival HCL Technologies Ltd, is round the corner.

“Indian companies with their acquisitions of companies in the U.K. are increasingly seeking to harness the size and scale of global operations on one hand and unlock the potential in emerging economies on the other, exhibited by the acquisition of Jaguar and Land Rover, the U.K. based iconic marquees of the U.S.-based Ford Motor Company by Tata Motors Ltd; and the acquisition of the U.K.’s Imperial Energy Plc, one of the leading oil companies with assets in Russia by India’s state owned oil company ONGC Videsh Ltd, subsidiary of Oil & Natural Gas Corporation (ONGC) Ltd.” said Rangar

The U.K. has been the country of choice for overseas investments by Indian companies that invested $6 billion in the country during the first half of 2008. The investments by India Inc. in Britain during the fiscal year 2007-08 has created 3,846 jobs, ahead of its rival economy China that was involved in creating only 898 jobs, according to the U.K.’s Department of Trade and Industry. In terms of the number of new projects, India ranked seventh with 75 new projects, out-numbering China with 59 new projects.

OVL GETS RED CARPET FROM IMPERIAL FOR 61.9% STAKE

ONGC Videsh (OVL), the foreign investment arm of the country’s largest exploration company, ONGC, on Tuesday put in a formal bid to acquire UK-based oil firm Imperial Energy at 1,250 pence per share. Imperial Energy, with assets in the Russian Federation and CIS countries, is valued at $2.58 billion at the bid price.

The Economic Times

India’s market cap crosses Rs 70 lakh crore-mark

Investors’ wealth on the Indian bourses has crossed Rs 70,00,000-crore milestone for the first time in history, with an average increase of over Rs 40 crore in every minute of trading during 2007. The total wealth, measured in terms of cumulative market capitalisation of all the listed Companies on the Bombay Stock Exchange, has surged to a record high of Rs 70,38,538 crore (over $1.7 trillion), the latest data available with the bourses show. This marks a ten-fold surge in the total market value in just about four and a half years. It stood at about Rs 7,00,000 crore in May 2003. The investors’ wealth has grown by Rs 34,14,181 crore, or about $970 billion, since the beginning of 2007. Taking into account the 249 days of trading so far this year, this means an average gain of about Rs 13,711 crore a day or about Rs 41 crore a minute.

The Financial Express
http://www.financialexpress.com/news/
Indias-market-cap-crosses-Rs-70-lakh-croremark/255870/