Introduction to the Industry
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, Investment funds and some government sponsored enterprises. The history of Indian capital markets spans back to 200 years, around the end of the 18th century. It was at this time that India was under the rule of the East India Company.
The financial services sector contributed 15 percent to India's GDP in FY09, and is the second largest component after trade, hotels, transport and communication all combined together. India is one of the five countries classified as big emerging market economies, apart from China, Indonesia, Brazil and Russia. A study by World Bank predicts that by 2020 the share of these five biggest emerging markets in the world output will be 16.1%. This surge in growth is supported by an expanding middle-class population with an increase in public and private investment. India has a strong middle class of 250-300 million expected to double in the next two decades. The country is set to become the fifth largest consumer economy with aggregate consumption likely to grow to 1.53 trillion USD in 2025. During 2009-2010, foreign exchange reserves increased by US$ 31.5 billion from US$ 252.0 billion to US$ 283.5 billion, demonstrating that India is emerging as a preferred destination for foreign investors. The Indian financial services industry is in a process of rapid transformation. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. Today’s global economy is characterized by multi-directional flows of products, services, people, ideas and capital. A complex web of interconnections is bringing new opportunities and options to companies and individuals around the world. Most notably, we have seen firms from emerging economies expanding at a speed and scale that is transforming the nature of global business.
About Mergers and Acquisitions (M&A):
India’s business environment has become increasingly amenable to M&A, particularly cross-border transactions. Over recent years, Indian companies have faced few difficulties in accessing finances to purchase companies much larger than themselves they have gradually turned to debt, private equity and foreign lenders and are benefiting from the increasingly sophisticated domestic banking sector. It is still early to gauge the medium to long term impact of the US credit crunch on the M&A prospects for Indian companies. Some companies will be affected by the tightening of credit but other, cash-rich companies may find that they have a renewed competitive advantage in bidding against firms whose usual sources of finance have become constrained. After a subdued 2009, the M&A deals seem to be picking up steam in 2010. India had great 2007 and 2008 when it came to Mergers & Acquisitions however, 2009 recession saw drastic fall in cross border M&A deals. According to report published by Dealogic, India has emerged as the second most targeted nation among the BRIC region after China. India has already mopped up merger and acquisitions deals worth $2.8 billion in the year 2010.
Merger and Acquisition deals for 2010
Sector wise breakup of the M&A deals for the year 2010 shows that Oil & gas sector accounted for 29% of the total deal value while the Health & Pharma sector accounted for 12.93%. Electric power generation sector was the third highest contributor as it contributed 12.31% in deal value. Total number of M & A deals from the year 2008-2010
Classification of M & A deals into inbound and outbound from the year 2004
Out of these, 173 were domestic deals amounting to a deal value of USD 21.8bn, 76 were...
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