India Inc puts M&AS in back seat, turns focus to projects
After a series of mergers and acquisitions (M&AS) in the past six years, top Indian business houses, led by Tata, Aditya Birla, Adani and JSW groups, are now taking a pause. They would rather focus on finishing billions of dollars worth of projects in hand.
Bankers said in six years, the Tatas acquired companies worth ~67,601 crore, JSW Group purchased assets worth ~36,628 crore (excluding Bhushan Power & Steel), while Adani Group bought 20 assets for ~68,000 crore. The M&AS by Aditya Birla Group, including the Vodafone-idea amalgamation and Aleris' acquisition in the US, were worth ~2,38,246 crore.
“Conserving cash is the biggest motto for the group this year,” according to an executive of the Birla group, the owner of India’s biggest cement firm, Ultratech Cement, which has made a series of acquisitions, including that of Binani Cement and Century Textiles’ cement business.
The acquisition of Aleris by Novelis, a subsidiary of Hindalco (belonging to Aditya Birla Group), was cleared by the regulators earlier this year. "The focus now is to take stock of the situation and complete the ongoing projects," said the executive said.
As economists predict the Indian economy to slow down considerably, companies are going back to the drawing board. For example, Adani Group, which has inducted several strategic investors in its city gas distribution, electricity distribution, LNG, fuel retail, renewable energy, and data-centre platforms, will be focusing on developing its data centre and airport businesses in India. The group bagged six airports in India — carrying almost 10 per cent of India’s total air traffic — after global bidding last year.
“All our projects are on track. Besides earmarking massive capex in these sectors, the key differentiator in our technology parks and airports will be deep leveraging of technology, knowledge, and resources from existing infrastructure,” said a group executive. The tie-ups with global investors should help access funds and the latest technology. The executive said Adani Group's acquisitions in the port, power and electricity distribution, coupled with capital management, helped it accelerate and
grow even when the economy slowed down. “The strategy has enabled to whip up a combined market cap of more than $20 billion and leverage integrated platforms — the largest transportation and energy verticals in India and a shift from business to customers — with the customer base across gas, electricity, airports, and consumer products set to touch over 100 million customers,” the official said.
This change also ensured cash conservation and stable cash flow, while deleveraging to support the next phase of growth. The group managed to successfully place seven bonds to raise $4.26 billion from the international market just before the Covid19 pandemic hit global markets.
“The strategy now is to build on the strong foundation set before the Covid-19 pandemic and spend on creating new assets, as we think the economy will bounce back sooner than expected,” the executive said.
A similar strategy has been adopted by JSW Group, which acquired several distressed assets in India, including Jaypee
Group’s power projects, and Monnet Ispat steel mill. The group flagship, JSW Steel, had also won the race to buy Bhushan Power and Steel for ~19,700 crore before the pandemic hit.
The expansion of its steel production facility in Vijaynagar, Karnataka, from 12 mtpa (million tonnes per annum) to 18 mtpa is on track, though the expansion at a much smaller plant in Dolvi, Maharashtra, has been delayed by six months. After adding Bhushan Power and Steel’s (BSPL'S) and its own capacities, the company’s total capacity would touch 30 mtpa, as it spent almost half its ~49,000-crore expansion capex in the last two years. “We are fully committed to our acquisition of BSPL,” said Seshagiri Rao, MD and CEO, JSW Group. The acquisition of BPSL is not part of the ~49,000-crore expansion capex.
Tata Steel, which acquired Bhushan Steel for ~35,200 crore, would focus on expanding its capacity in Odisha to 8 mtpa with an investment of ~23,500 crore. Similarly, Tata Sons, is infusing funds in group firms to ensure that their plans remain on track.