Circa 2003 was the year of Indian companies which instead of seeking investments, as has been the trend for many years, went on a buying spree. According to conservative estimates, the total funds spent by Indian firms' on acquisitions amounted to about $650 million last year and could be much higher. Over 30 Indian companies, including Tata Sons, Reliance Industries, Infosys and Mahindra & Mahindra went on a shopping binge abroad. We take a look at some major acquisitions abroad by Indian companies:
Reliance Infocomm Ltd
In one of the most biggest deals of the year, Reliance Infocomm offered to buy US-based Flag Telecom, a bandwidth provider and operator of submarine cable FLAG. Reliance was planning to acquire the transoceanic cable provider for around $211 million in cash, with a price of $97.41 per share.
The acquisition, if materialises, would witness the emergence of Reliance Infocomm as one of the world's largest telephony and services provider as it would be operating its own submarine cable, resulting in it being able to offer prices at competitive prices.
Reliance was planning to acquire Flag Telecom through a special purpose vehicle, Reliance Gateway Net Ltd. The Indian firm had outbid Arizona-based equity research firm Pivotal Private Equity.
Reliance Infocomm, which has emerged the largest code division multiple access-based wireless in local loop, expects the buy to compliment to its existing telephony operations.
In a message posted by Flag Telecom on its website, the company said it would prefer to sell the ailing bandwidth provider to Reliance Infocomm.
Flag Telecom had earlier filed for bankruptcy under Chapter 11 and successfully came out of it.
In an attempt to make inroads into the Southeast Asian commercial market, India's largest commercial vehicle manufacturer Tata Motors Ltd (TML) is planning to acquire Daewoo Commercial Vehicle Company (DCVC) of Korea. Even though, there has been no official communiqué from both the parties on the acquisition price, it is believed to hover at around $118 million (Rs 534.30 crore), according to reports in the Korean press.
TML signed a binding Memorandum of Understanding (MoU) with DCVC on November 6, 2003. The MoU was signed by Ravi Kant, executive director (Commercial Vehicle Business Unit) and Praveen P Kadle, executive director (Finance and Corporate Affairs) on behalf of Tata Motors and by Chae Kwang Ok, receiver on behalf of DWCV.
The transaction, which is subject to regulatory approvals of both Indian and Korean authorities, is expected to close in the next three months time.
However, the price does not take into account the Rs 179-crore unpaid bills and reserve requirements of the Korean major. The acquisition would be funded through TML's internal accruals and DSP Merrill Lynch acted as the investment bankers for the deal.
DCVC is the second largest manufacturer of heavy commercial vehicles, including trucks and tractors, in Korea and has a market share of 26 per cent. It produces around 20,000 units per annum on a two-shift basis. TML expects the company's manufacturing line, with makes 200 to 400 HP range of vehicles, to compliment its existing range of trucks.
Earlier TML as part of its international strategy, joined hands with Republic of Senegal to set up a bus making unit at Thies, in that country. TML was also awarded a tender for 500 buses, valued at $19 million by the West African country. During his visit to TML's manufacturing facility at Pune, Senegal president Abdoulaye Wade had expressed interest in sourcing small cars from the company.
Videsh Sanchar Nigam Ltd
The Tata Group-owned Videsh Sanchar Nigam Ltd (VSNL) has acquired the assets and network of Gemplex Technologies, an Internet Protocol-based virtual private network (VPN) solution provider in the US, Europe and the Far East.
The acquisition is expected to be through VSNL America Inc, VSNL's wholly-owned subsidiary which was set up in 2003. Gemplex has a ready-for-service network in 15 countries and VSNL expects to introduce its services in a phased manner with initial focus on eight countries including the US, European countries and Far East countries.
"The acquisition catapults VSNL into the league of global telecommunication players. It enhances the company's existing network capabilities and gives it a ready virtual private network platform in high traffic regions," VSNL Director (operations) N Srinath said.
The acquisition price was not revealed by VSNL, however, the company expects VPN to be a growing business, with the market size expected to grow upto Rs 400 crore over the next couple of years.
The acquisition was completed on June 30, 2003.
VSNL had earlier forayed into Nepal and Sri Lanka and had set up subsidiaries in these countries.
Infosys Technologies Ltd
Indian software bellwether Infosys Technologies Ltd acquired Expert Information Services Pty Ltd, an Australian company with expertise in telecom sector for $22.9 million. The move came as a surprise as Infosys had earlier shied away from takeovers. The company's chairman and chief mentor N R Narayana Murthy said the buy created a history of sorts for the company.
"There is some special expertise that people of Expert bring to the table, specifically in the area of telecom and that is something we don't have today," Murthy said, summing up the rationale behind the buy.
"Infosys' operations combined with the service capabilities of Expert would enable us to become a major player in the Australian market," said Infosys managing director Nandan Nilekani.
The buy is also significant as Infosys recently bagged a five-year contract to develop software for Australia's slargest telecom group, Telstra Corp Ltd.
Expert Information employs 330 people and has 40 clients, mainly from the telecom sector, while Infosys has a branch office in Australia that employs 73 people, including 19 permanently based in that country.
Wipro Technologies Ltd
Wipro Technologies Ltd signed an agreement to acquire the global energy practice of American Management Systems (AMS) for $26 million in cash. AMS has over 90 domain experts and IT consultants and the buy is expected to strengthen Wipro Technologies' energy and utility verticals.
The acquisition is also expected to improve the company's prospects as a consultancy, apart from improving Wipro's offshoring capabilities.
AMS has over 50 client relationships with 15 active engagements across Europe and the US, the company had stated in a press release. The clientele, which includes investor owned utilities, public power utilities, regional transmission companies and independent system operators, would become clients of Wipro.
This is Wipro's fourth acquisition as the IT behemoth had earlier acquired the IT division of GE Medical Systems and Spectramind, an IT enabled services provider. Wipro had also acquired the R&D division of Ericsson in India.
Mahindra & Mahindra Ltd
Automobile giant Mahindra & Mahindra (M&M) recently made a bid for Valtra, a Czech tractor firm, which the tractors and car-maker expects would give it an enviable presence in the global market.
The Mumbai-based firm, which has a 29.2 per cent share of the domestic tractor market, had submitted a bid of around €350 million Valtra tractor unit, which industry sources believe is the second highest bid.
In September 2003, Georgia-based AGCO had submitted a €600- million bid for Valtra. Earlier, Kone, the parent company of Valtra, had put Valtra's Finnish and Brazilian operations - Valtra Oy Ab and Valtra do Brasil Ltd, respectively - up for sale.
Kone was reportedly planning to focus on core businesses, including its elevators business, and the sell off would also help it in paying off certain debts.
The company is also believed to be looking for similar plants elsewhere and has an eye on the US market, where it has a tractor assembly plant.
M&M is also making inroads into the European market, even as it signed a deal with Italy-based Eurasia Motors to assemble the vehicles and distribute them in that country.
The company expects the move to help it make inroads into European territory. At present, M&M exports to certain markets in south and central America and Africa, even though in small quantity.
M&M would introduce its Scorpio (both petrol and diesel versions) and Bolero range into Italy, with an eye to spreading wings in Europe.
Jindal Polyester Ltd
Jindal Polyester, the manufacturers of polyester resin, film and yarn, acquired French polyester producer Rexor for around 10 million euros last year.
The company sells over 50 per cent of its total production in Europe and according to industry sources, this move would further strengthen the polyester major's foothold in Europe.
Jindal Polyester acquired Rexor from a consortium of banks.
Ranbaxy Laboratories Ltd
India's pharmaceutical giant Ranbaxy Laboratories is believed to have acquired French generic drug company RPG Aventis for around $70 million. Industry sources say that the move is to turn it into a leading player in the global generics industry. Ranbaxy has over a dozen manufacturing and R&D plants worldwide, including America and China, and is expected to notch up a sales turnover of $1 billion next year.
"The acquisition will give us a significant presence in the European market and France in particular," Ranbaxy Laboratories CEO designate and joint managing director Dr Brian Tempest said.
Ranbaxy will retain the name RPG, to leverage its brand equity and visibility in the French generic market. Ranbaxy would make additional investments to further strengthen the business.
RPG (Aventis) was ranked fifth in the French generic market with sales of $64.7 million and a market share of over 6 per cent.
The company was also looking at more brand-driven acquisitions in the US market. "We are keen to acquire brands in therapeutic areas of antibiotics and urology in that market," Tempest said.
Bharat Forge Ltd
Bharat Forge, the flagship company of the Rs 2,500 crore Kalyani Group, acquired a 150-year-old German forgings company Carl Dan Peddinghaus (CDP) GmBH and emerged as the second largest forging company in the world, second only to Thyssen Krupp last year.
The German company earns a major share of its revenue from Europe and the acquisition would enable Bharat Forge to have a strategic position in the global forging industry. The Indian firm is also planning to expand its export potential and the takeover is of utmost importance to its global strategies.
CDP's clientele includes major companies across the globe like Volkswagen, BMW, Daimler Chrysler and Ford among others.
Bharat Forge would also utilise CDP's technology at its Pune plant, which has a 15 per cent to 20 per cent cost advantage per unit as compared to CDP.
The company would also invest Rs 350 crore in the next three years for capital expansion.
Bharat Sanchar Nigam Ltd
The state-owned telephony services major Bharat Sanchar Nigam Ltd (BSNL) signed an MoU to commence its International Long Distance (ILD) operations in Sri Lanka by the end of 2004 and is expected to begin its ILD operations in the island nation from February next year.
BSNL's contract, with Videsh Sanchar Nigam Ltd (VSNL) for routing of international calls through the latter's network, ends this year. With the commencing of its own operations, BSNL expects to bring down ILD tariffs substantially and result in increasing its revenues.
The company is also believed to be bidding for a telecom license in Kenya, even as it is looking for opportunities in countries as far as Iraq.
Dabur India Ltd
Consumer goods major Dabur India in September 2003 acquired Britain-based cosmetics firm Redrock Ltd after obtaining all mandatory and regulatory approvals.
Sundaram Fasteners Ltd
Chennai-based Sundaram Fasteners Ltd (SFL) acquired precision forgings business of UK-based Dana Spicer Europe Ltd (DSEL) through Cramlington Precision Forge Ltd (CPTL),a wholly-owned subsidiary of the company.
CPFL paid around 1.5 million sterling pounds for DSEL and expects the buy to provide it with a foothold in Europe, one of the largest auto markets in the world, says SFL chairman and managing director Suresh Krishna.
The agreement with DSEL includes a supply agreement with Dana Automocion, an associate of DSEL, under which Dana Automocion would source its requirement for precision forgings from CPFL.
Krishna had said the acquisition is a part of SFL's efforts to globalise the business of the company.
Tata Steel is reportedly looking for acquisitions in Eastern Europe, where many old state-owned steel plants have been put on the block.