Greed is finally good for acquisition hungry IT companies whohad been straining at the leash so far. In one stroke, the Finance Ministerhas unleashed their wildest fantasies by giving them the freedom to acquireshares in foreign companies up to an amount of $100 million-that's thepiffling bit, actually-or, an amount equivalent to ten times their exportsin a year, whichever is higher. Hold your breath: for TCS, the country'slargest software exporter in 1999-2000 with exports of Rs 1,820.35 crore,this means an acquisition spree that can rack up to $3.6 billion.Here's how the shopping bill can look for the top four software exporters inthe country planning to stakeout companies abroad: Wipro with exports of Rs1,044 crore in 1999-2000, can spend up to $2 billion; Infosys (exports: Rs870 crore): $1.7 billion; Satyam (exports: Rs 663 crore): $1.3 billion; HCL(exports: Rs 633 crore): Rs 1.2 billion.
If that sounds as if all the sops in capital account liberalisation havegone in favour of the big guys, take heart: Budget 2001 also has a lure forNew Economy startups. Mr Sinha now allows Indian companies to invest abroad,up to $50 million on an annual basis through the automatic route-withoutbeing subject to the three year profitability condition.
Predicting a rush for overseas listings and a rash of acquisitions abroad,Mr Phiroz Vandrevala, executive vice-president, Tata Consultancy Servicessays: "The government has done its bit in giving the freedom to invest inoverseas acquisitions. Now, it is upto the industry to take advantage of thesituation. If it makes a commercial sense for a company to invest inoverseas acquisitions now it is not restricted by any limits."
Adds Mr Saurabh Srivastava, chairman of IIS Group: "It is good that thefreedom and onus of making such investment is with companies and they arenot restricted with any artificial barriers.''
In addition, are the other controls which have been summarily dismissed, andwhich make investing abroad a snap now. Consider why Indian New Economyplayers are licking their chops:
Companies which have issued ADRs/GDRs may make foreign investments upto 100 per cent of these proceeds up from the current ceiling of 50 percent. Mr Arun Jain, chairman and managing director, Polaris Software: ``Companies looking forward to ADR/GDR proceeds that can be invested intotal abroad is a notable progression. This automatic route will be welcomeconsidering the statutory regulations that companies normally have to gothrough.''
ADRs/GDRs to have two-way fungibility. Says Ashok Soota, chairman andCEO, Mindtree Consulting: ``The decision on reverse fungibility will makeIndian IT companies truly global.'' Indian companies may now list in foreign stock exchanges by sponsoringADR/GDR issues against block share holdings. Adds Mr Dewang Mehta,president, Nasscom: ``Two-way fungibility is particularly heartening forIndian software companies listing on the NYSE and Nasdaq. We expect thatthis will increase the confidence of overseas investors. When the marketconditions improve and more Indian technology companies list, this provisionwill prove to be a major help."Mr Sinha has tossed the gauntlet-after years of complaining, the industrynow has to prove that it has the cojones to think big.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
