DEALTALK-Cheap foreign loans spur India's outbound M&A march

Sun Jun 16, 2013 5:00pm EDT
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By Sumeet Chatterjee and Denny Thomas

MUMBAI/HONG KONG, June 17 (Reuters) - Foreign banks are fuelling India's recent burst of overseas takeover bids, offering cheap U.S. dollar loans to Indian corporates hungry to expand beyond their home state.

The stream of financing offers from banks such as Standard Chartered, Citigroup and Deutsche Bank comes after some U.S. and European lenders pulled back from the Indian market last year as the country suffered through an economic slump.

Banks are now back, funding the entire amount of Apollo Tyres Ltd's $2.5 billion bid for New York-listed Cooper Tire & Rubber Co, a company nearly three times the size of its Indian suitor.

Bankers said lenders were taking advantage of a window of opportunity that exists while monetary policy remains loose, before any scaling back of abundant liquidity by the Federal Reserve and other central banks raises their cost of funding.

Indian companies are bidding for at least $10 billion worth of deals and, if successful, the outbound M&A volumes this year would rise to $13 billion, the highest since a record year in 2010, Thomson Reuters data show.

At least one of these takeover attempts have hit roadblocks.

But the revival of M&A activity is good news for foreign investment banks operating in the country, which for years have struggled with wafer-thin margins. The aggressive lending from Wall Street is similar to the bank loans fuelling deals in Southeast Asia.   Continued...