Business engagement level between US and India touches new high
9 May 2010, 0031 hrs IST,Lisa Mary Thomson,ET Bureau
Chintamani Mahapatra, chair of the American Studies Programme at the School of International Studies at Jawaharlal Nehru University, feels that as the recession comes to an end, American companies would want to promote their interests in areas like insurance, banking and technology (for power and otherwise) as well as in the energy sector, though this is subject to the level of trust, which he thinks is below expected levels currently. There are also worries about whether India is getting enough mindshare in the US given the immense engagement of America with Pakistan, Afghanistan and China. But Debashis Chatterjee, director of the Indian Institute of Management, Kozhikode says that “The opening of key sectors such as retail and higher education to FDI and the growing threat of trans border terrorism will bring Obama and Singh together more than ever before. It is not unrealistic to expect Indo-US bilateral trade to swell to $300 billion within the next 10 years.”
On the reverse side, US Embassy officials feel that the changes in America are positive for Indian companies looking for investment opportunities and sources for high quality products. “The Obama Administration wants to create at least two million new jobs, so the US will welcome investment from Indian companies or Indian buyers of American-made products. As part of the National Export Initiative, the US Export-Income Bank will increase its financing available to small and medium sized businesses, which will provide new opportunities for Indian buyers to do business with US companies,” they say. And they add: “One of the great strengths of the US economy is its adaptability. “Though the changes can be painful in the short run for those involved, ultimately by shifting resources and manpower into new areas we emerge stronger.”
Experts also see scope for a greater number of mergers and acquisitions, in strategic ways that boost the local economies. Says Robinder Sachdev, co-founder of the US-India Political Action Committee, and president of Imagindia Institute, a think-tank that works on issues of economic diplomacy and promoting India’s image, “If India wants to capture business and gain marketshare, it should look at Mid-West America, instead of focusing on just the East and West Coast. Valuations are likely to be lower in Indianapolis than they are in Washington DC. Since those states are hurting more, the demand for lower cost goods and services will be even higher.”
At a practical level, he suggests Indian companies should explore the list of companies which have filed for Chapter-11 bankruptcy in the US. Not only are they likely to get good valuations for firms which are looking at distress sales, there is also possibility for negotiation with the State for rebates or tax deferment. “There may be positive response given that they want to businesses to sustain. More business will also mean more jobs,” adds Sachdev.
Anil Kumar, CEO and MD of ImaCS Virtus Global Partners, which offers advisory to North American firms and PE funds looking at India-oriented investment, also sees this as a good time for Indian companies to make acquisitions as well as raise capital from US based financial investors seeking higher returns. He sees the beginnings of this trend reflected in recent transactions such as Essar’s acquisition of US-based Trinity Coal for $600 million in March this year and Reliance Industries’ potential investment of $1.7 billion for a stake in US-based Marcellus Shale. Kumar says that there has also been over $800 million of private placements from US-based funds into India and $1 billion of US-bound acquisitions by Indian companies in the first four months of 2010.
