The silver lining

A CMIE study says Rs 70,
18 April 2003

Mumbai: Deals worth Rs 70,000 crore can be struck if the proposed disinvestment of state-owned companies in the fiscal 2003-04 and major mergers and acquisition deals are completed successfully, according to study done by the Centre for Monitoring Indian Economy (CMIE).

The disinvestment of public sector companies which, if followed by the open offers, would generate a minimum of Rs 11,000 crore. CIME estimates show that the privatisation of National Aluminium, Hindustan Petroleum, Bharat Petroleum and Maruti Udyog would generate around Rs 8,000 crore. Of this, the privatisation of National Aluminium and Hindustan Petroleum would be followed by open offers, entailing an additional amount of around Rs 3,000 crore.

Besides, the liberated environment in the banking and telecom industry would also lead to major mergers and acquisitions worth around Rs 50,000 crore, the CIME study says.

However, it said that the current economic uncertainty due to the prolonged economic slowdown along with the fallout of the Iraq war may lead to a major drop in the value of mergers and acquisitions, with an increased focus on consolidation and restructuring of existing businesses rather than an attempt for inorganic growth.

"The uncertain global scenario, the rising oil prices and oil shortage concerns, may even cause the government to postpone the disinvestment of its two navratnas engaged in refining of petroleum products, Hindustan Petroleum and Bharat Petroleum," the study says.

The mergers and acquisitions in the telecom industry is set to increase with the cabinet relaxing the non-transferability clause pertaining to the telecom licences on 25 March 2003. Telecom companies will now be able to transfer individual service licences. This was not possible earlier.