The emergence of global corporate champions from India

The last decade in Asia has thrown up many interesting stories but one that underlines the growing importance of this region is the emergence of Asian corporate champions. These domestic champions have ventured overseas through transformational transactions to become true global champions.

Nowhere has this been more evident than in India. Companies such as Tata Steel, Tata Motors, Hindalco and Bharti Telecom, among others, have made acquisitions in the past few years that have put them on the global map. These, and other transactions from Asia into Europe, have set benchmarks in their industries.

In the first year of this decade, outbound Indian M&A was around $5 billion. Things picked up in the second half of the decade with close to $85 billion worth of deals announced in the past five years -- making India one of the most acquisitive countries in Asia.

The next wave of buyers will be companies that have so far stayed away from global deals but have seen what is possible. A path has been blazed for the next generation of Indian titans to follow.

Indian champions who have not participated in the first wave of global M&A and have aspirations to become global champions have well-capitalised balance sheets and are leaders in their fields. Half a dozen to a dozen of them will look at big-ticket transformational M&A deals in the next couple of years.

A Citi Indian Investor Conference in late May attracted 350 institutional investors from across the US, Europe and Asia, underlining that there is still strong interest to hear the Indian story and the ambitions that Indian companies have.

These ambitions will also likely get support from domestic and international capital markets. At the start of the decade, capital markets issuance from Indian companies was around $1.5 billion, or 1% of the total Asia-Pacific issuance.

As India has emerged during the decade, more and more international funds have been looking to invest in equity or debt instruments from the country. Companies, keen to raise capital to support growth, have provided ample supply.

By 2005 issuance from India had topped $28 billion -- hitting 10% of total Asia-Pacific supply. In 2010 already, issuance from India is in excess of $33 billion with a share of 12.5%. This capital will be used to support growth and the expected further increase in outbound M&A from the country.

But the M&A trend won't be one-sided. Citi growth forecast for India is 8.4% for 2010 and 8.6% for 2011 and with Indian companies' continued strength this will also attract foreign investment into the country. As such, there will be a steady flow of inbound (deals) into India given that global companies are still attracted by the growth potential. Volumes are already at $8 billion year-to-date, surpassing the $6 billion figure for the whole of 2009.

As we start the second decade it promises to be another decade of achievements from India across M&A and capital markets.