Thursday, December 29, 2005

2005 - The Year that was for Business India

1. 2005 saw a continuation of the roaring bull market which began around March 2003.

2. 2005 also marked the coming of age of corporate India in terms of gaining confidence and moving overseas. The number, breadth and size of overseas acquisitions were unprecedented. The Tata group alone did deals (overseas acquisitions) of over a billion dollars in 2005.

3. 2005 also saw the beginning of big-ticket FDI flows into the country. The $1.5 billion purchase of a 10 per cent stake in Bharati by Vodafone comes to mind straightaway as does Merrill buying a 50 per cent stake in DSP for $500 million. Indian assets have never been more valuable or in demand. The year also saw the announcement by POSCO of a $13 billion commitment on building a steel plant in Orissa (India's largest FDI commitment till date)

4. 2005 saw corporate India having unprecedented access to capital. Any decent company had a choice of private equity, FCCBs, domestic IPOs, or could go for an ADR/GDR.

5. Private equity came of age in 2005, with the best names in the business either setting up operation (Blackstone, Carlyle) or snooping around for deals from overseas (KKR, Apax, etc). While no major deals were completed in 2005, highlighting the competition to put money to work, the days of buyouts are not far away.

6. Reforms in 2005 hit a roadblock as far as movement in critical areas of power, PSU divestment, and labour laws was concerned, but the markets did not really seem to care. Such was the love story with India that most investors refused to even contemplate what could puncture their long-term growth expectations.

7. 2005 marked the third year in a row of GDP growth over 7 per cent, and even the most die-hard cynics began to wonder whether India had hit an inflection point. Could 7 per cent GDP growth be the new base

8. For the first time in 2005 we actually had significant movements of the rupee in both directions, with many a corporate caught out as the initial expectations of a strengthening rupee reversed towards the year end. Companies can no longer take the rupee for granted in terms of pace and direction of movement.

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