Business heads of three leading Indian firms from as many sectors - automaker Mahindra and Mahindra, consumer goods major Godrej and biotechnology firm Biocon - on Monday said they were looking at acquisitions in overseas markets as the rupee appreciation had made such plans a good-value proposition.
"With the rupee appreciating, you are going to be able to acquire companies," Biocon MD Kiran Mazumdar Shaw said on the sidelines of the India Economic Summit. Biocon is looking to buy companies in the US, Europe and emerging markets and this could happen by the end of this fiscal, she said.
"Rising rupee is a good time to go and acquire companies abroad," Godrej group chairman and managing director Adi Godrej said at the same summit.
"We are looking at emerging markets like Latin America, South Africa and China," Godrej said, adding that the acquisition would be in the range of $500 million.
An acquisition of this size would cost today less than Rs 2,000 crore (Rs 20 billion) in the Indian currency, but would have been higher by 10-15 per cent as of last year. Rupee is currently trading at around 39.80 to a dollar, representing a surge of about 14 per cent in a year.
Automotive major M&M's vice chairman and MD Anand Mahindra also said that the company was planning to acquire companies in overseas markets as the rupee's rise against the dollar had cut down the cost of overseas acquisitions.
In the past one year, there has been a spurt in overseas acquisitions by Indian companies, including Tata Steel's $12.1 billion takeover of world's sixth-largest steelmaker Corus, even though the Anglo-Dutch firm was much larger in size compared to India's largest private sector steel firm.
Besides, companies like Hindalco Industries and Suzlon Energy have also made substantially large acquisitions this year. Rupee appreciation is believed to have led to a significant reduction in the overall acquisition costs for the cross-border deals made in the recent months.
However, this trend in the currency market is not auguring well for exports from the country. According to the government data released on Monday, the country's exports rose over 35 per cent in October to about $13 billion, as against a 24 per cent rise in imports to about $21 billion.
However, the commerce secretary G K Pillai said it may not be enough to meet the $160 billion target for the current fiscal.
"If this (October) trend continues, we may achieve exports of $140-145 billion against the target of $160 billion," Pillai said on the sidelines of India Economic Summit. India revised its export target to $160 billion in April after a surge in its currency vis-a-vis the US dollar.
Rise in shipments of petroleum products, gems and jewellery and engineering goods helped boost exports, but textile, leather and marine products, tea and handicrafts are down, Pillai said. Textile exports fell by 22 per cent, handicrafts by 66 per cent, leather by 9 per cent and marine products almost by 20 per cent.
