Outbound investments by Indian firms: Analysis and Implications

Abstract

Outbound investments, as an idea, have been an attractive proposition for many firms globally. The emergence of globalization coupled with the development of financial markets around the world has given further traction to this trend. Since the last decade, companies from emerging markets such as China and India have been in the forefront to strike deals outside their national boundaries. One of the most preferred routes for Indian firms to invest overseas is through mergers and acquisition (M&A) transactions. In 2006, India outperformed Asia Pacific nations including China, South Korea and Singapore in acquisitions abroad crossing the $10 billion mark. Since 2003, the United States and the United Kingdom have become the top two global investment destinations for Indian capital. A broad range of factors, sparked by legislative reforms since 1999, has led to this tremendous surge in activity by Indian corporates in the international arena. Also, this outbound wave has seen quite a striking shift over the past 10 years, changing from deals mostly centered on Information Technology & pharmaceuticals to those in completely new domains like consumer and energy space1. It is expected that outbound deals will see a further uptrend as Indian companies have strong balance sheets, they have a deep understanding of international markets and are thus expected to engage in ambitious outbound M&As in the future as well.