We haven’t really commented on the TATA-Corus deal, partly because the news media was saturated with coverage and there’s nothing really to add. Suffice to say that from a strategic standpoint, it makes perfect sense given Tata’s ability to produce low-cost steel. I’d say both sides got a good deal with Corus shareholders getting a fair premium, while Tata lands itself a company in good shape and with a global marketshare, at a reasonable price. However, keep in mind that Tata Steel was fundamentally a debt-free company that has now taken on a huge amount of debt, which may or may not make sense in the long-term. We’ll just have to wait and watch.
I think hidden in all the media hype though is an interesting statistic vis-a-vis FDI flows. For long, Indians have obsessed about the amount of inbound FDI, especially when compared to China (India has received less in FDI inflows since 1991 than China will receive this year alone). Interestingly enough, if the Tata-Corus deal and the Videocon takeover of Daewoo Electronics does go through, India’s FDI outflows will, for the first time, exceed FDI inflows. Effectively, the projections for 2006 are that India will receive $9 billion in inflows while outflows stand at $19 billion, spread across 100+ deals, turning India into a net exporter of capital (to be precise though, a lot of the external acquisitions are not funded by domestic capital, but from foreign sources). At the very least, the investment bankers among you, especially those working on outbound M&A deals, can expect a big, fat bonus this year :)
PS: To put things in perspective, the U.S.’s outbound flows were at $250 billion in 2004.