New Delhi: IT and ITeS dominate outbound investment from India to the US, accounting for 48 per cent of the total of 48 deals, worth over $2 billion in 2006-07, according to the latest FICCI-Ernst & Young (E&Y) report.

Terming 2006 as a watershed year for the corporate sector in terms of M&A activities, the Report on Direct Investments in the US by Indian Enterprise says that the overall outbound deals, or global M&A, valued at $4.3 billion in 2005, crossed the $15 billion mark in 2006. It forecasts that it could well breach the $35 billion level in 2007.

According to the report, outbound deals by Indian companies will increase in number and change in nature.

"At present, only the big deals get reported, but there are a lot of small and mid-sized deals in the $20-$60 million range. It is likely that greater activity will be witnessed in this band in the next few years," a statement said.

Going by those standards, Indian companies are creating more jobs in America than they take away through back office and outsourcing work.
 
"In 2007 alone, Indian firms that set up shop in the US through greenfield units or via acquisitions created no less than 65,000 jobs," FICCI secretary-general Amit Mitra said while presenting the report.

"SMEs alone have created over 35,000 jobs in the US in the past year. It is also important to note that Indian firms are acquiring and reviving companies that were either closed or facing closure, giving hope of new job opportunities," added Mitra.

The study also says nearly three-quarters of the companies that were shopping in the US were small and medium enterprises (SMEs) or midcap firms.  Of the 46 companies that went to the US in 2007, 33 (or 72 per cent) were SMEs and midcaps.

That's not all. Of another 14 firms that invested in the US until March this year, over 50 per cent belonged to the SME and midcap category, the E&Y report said.

Mergers and acquisitions by Indian companies valued at $4.3 billion in 2005, crossed the $15-million mark in 2006 and topped $35 billion in 2007, according to the E&Y study.

Of the 86 M&As in 2007, 33 were by SMEs, the report added. There are around 80 Indian SMEs and midcaps with a presence in the US, and all of them are generating employment in the country, according to FICCI officials.

Though the investments made by SMEs are minuscule compared to investments by larger groups like Tata, Essar and Reliance, these firms together create substantial employment opportunities in the US, the report said.

"Around 60 per cent of the companies generating employment and investing in the US are SMEs," adds Mitra.