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strategy today for Indian Corporate. The three main objectives
behind any M&A transaction, for corporate today were found to be:
35
30
25
20
15
10
0
To Faster Acquisitio To Tax
improve growth in n of new eliminate shields &
Series1 33 28 22 11 3
2
Indian Investments Abroad
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Acquisition of Hollister-Stier Laboratories for US$ 122
million by Jubilant Organosys Ltd.
The main factors fuelling the growing hunger for M&As among
Indian companies are huge fund supply, globally competitive
business practices and a favorable regulatory environment,
besides higher margins, revenue, volumes and growth prospects.
The Reserve Bank of India has liberalized overseas investment
norms.
1) Hiked the overseas investment limit from 200 per cent of the net
worth to 300 per cent of the net worth;
2) Hiked the limit on overseas portfolio investment from 25 per cent
of their net worth to 35 per cent of their net worth;
3) Allowed Indian residents to remit up to US$ 1, 00,000 per
financial year, from US$ 50,000 previously, for any current or
capital account transaction or a combination of both.
4) Allowed mutual funds to invest funds to the tune of US$ 4 billion
in overseas avenues, from an earlier cap of US$ 3 billion.
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The top 10 acquisitions made by Indian companies
worldwide
Analysis: -
Deal value ($ ml)
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Tat Hin Vid Dr. Suz HP Ran Tat Vid VS
a dalc eoc Red lon CL bax a eoc NL
Deal value ($ ml) 12,0 5,98 729 597 565 500 324 293 290 239
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Interpretation: -
If we calculate top 10 deals it account for nearly US $ 21,519
million. This is more than double the amount involved in US
companies' acquisition of Indian counterparts. Indian outbound
deals, which were valued at US$ 0.7 billion in 2000-01, increased
to US$ 4.3 billion in 2005, and further crossed US$ 15 billion-
mark in 2006. In fact, 2006 will be remembered in India's corporate
history as a year when Indian companies covered a lot of new
ground. They went shopping across the globe and acquired a
number of strategically significant companies. This comprised 60
per cent of the total mergers and acquisitions (M&A) activity in India
in 2006. And almost 99 per cent of acquisitions were made
with cash payments. When it comes to mergers and acquisitions
deals in India, the total number was 287 from the month of January
to May in 2007. It has involved monetary transaction of US $47.37
billion. Out of these 287 merger and acquisition deals, there have
been 102 cross country deals with a total valuation of US $28.19
billion.
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Mergers and Acquisitions (M&As) in the IT and BPO Sector
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While the Tech Mahindra-Satyam deal bolstered the domestic
numbers, the total value of cross-border deals (outbound and
inbound combined) fell 83 percent to $156.5 million during January-
July this year. The cross-border deal volume at 13 deals was a
fraction of last year's level (47 deals).
Analysis: -
25 IT sector, 23.1
20 IT sector, 18
15 BPO sector,
BPO sector, 10.9
10 8.4
0
2008 2009
IT sector 18 23.1
BPO sector 8.4 10.9
Interpretation: -
As per above chart it has being clearly seen that in both IT as well
as BPO sector, the revenues are increased. The IT services have
grown by 28 per cent and have posted revenues of $23.1 billion.
The BPO services have grown by 29 per cent and have posted
revenues of $10.9 billion.
ANOVA Analysis: -
2008 2009
8
IT sector 18 23.1
BPO sector 8.4 10.9
Number of Observation
= 60.4 χ 60.4
= 912.04
= 1046.98 – 912.04
= 134.94
= (41.1)² + (19.3) – CF
= 2061.7 – 912.04
= 118.81
= 134.94 – 118.81
= 16.13
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ANOVA table: -
2
Total SST 4-1=3
F cal = X/Y
= 118.81/8.065
= 14.73
So, Ho is rejected.
The IT services have grown by 28% & the BPO services have grown
by 29%, so it has clearly seen that there is a significance difference
between the two years.
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Sales & Profit of few IT/BPO companies – 2009: -
Analysis: -
30000
25000
20000
15000
10000
5000
0
Infosys HCL
TCS Wipro Ltd.
Technologi Technologi
Sales (X) 27812 21693 25544 22681
Profit (Y) 5256 5988 3900 4320
Interpretation: -
From the above chart & graph, it has clearly seen that the sales of
TCS are much higher, but profit earned by Infosys is higher as
compared to others. The sales of Wipro is also higher than average,
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but in terms of profit, it is much lower. Let us find the correlation-
coefficient between sales & profits, it help to understand the co-
relation between them.
Sales Profit
Company (X) (Y) x = M-X y = M-Y x² y² xy
1141764
TCS 27812 5256 -3379 -390 1 152100 1317810
Infosys 125888
Technologies Ltd. 21693 5988 2740 -1122 7507600 4 -3074280
Wipro Ltd. 25544 3900 -1111 966 1234321 933156 -1073226
HCL Technologies
Ltd. 22681 4320 1752 546 3069504 298116 956592
2322906 264225
Total 97730 19464 0 0 6 6 -1873104
Mean 24433 4866
r = 4 (-1873104)
9639.31 x 3251
r = - 7492416
31337397
r = (-0.24)
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Co-relation analysis gives the idea of prevailing relationship natured
between two or more variables but it never gives idea of expected
change in one variable corresponding to some change in other
variable. The statistical tool which overcomes this problem is called
Regression Analysis.
Regression Analysis: -
byx = n (∑xy)
n (∑x²)
= 4 (-1873104)
4 (23229066)
= (-0.08)
bxy = n (∑xy)
n (∑y²)
= 4 (-1873104)
4 (2642256)
= (-0.71)
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y = (-0.08x) + 6820.64
(x-24433) = (-0.71y) +
x = (-0.71y) + 27887.86
Now, let us take estimation of profit & sales and apply on both
regressions line equations: -
y = (-0.08x) + 6820.64
y = (-2400) + 6820.64
y = 4420.64
x = (-0.71y) + 27887.86
x = 3550 + 27887.86
x = 31437.86
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Conclusion
1. The biggest takeover made by Tata (Tata-Corus) deal valued
at US$(12000 million) in India.
2. As per survey of corporate (secondary data), 33% of the
corporate objective behind M&A is to increase revenue &
profitability, while 28% of the corporate objective behind M&A is
to increase growth in sales faster.
3. The main factors fuelling the growing hunger for M&As among
Indian companies are huge fund supply, globally competitive
business practices and a favorable regulatory environment,
besides higher margins, revenue, volumes and growth prospects.
4. Almost 99 per cent of acquisitions were made with cash
payments.
5. Out of these 287 merger and acquisition deals, there have
been 102 cross country deals with a total valuation of US $28.19
billion.
6. The IT services have grown by 28 per cent and have posted
revenues of $23.1 billion. The BPO services have grown by 29 per
cent and have posted revenues of $10.9 billion.
7. Through ANOVA analysis I have found that there is a
significance difference between the two years.
8. The sales of TCS are much higher, but profit earned by Infosys
is higher as compared to others. The sales of Wipro is also higher
than average, but in terms of profit, it is much lower. So I have
found the correlation-coefficient between sales & profits, so it
helps to understand the co-relation between them. I found that
there is party negative correlation-coefficient between sales &
profit of IT/BPO companies.
9. I have also done the regression analysis of sales & profit of
IT/BPO companies. It helps companies to estimates sales & profit
for up-coming years.
10. I have found that if company’s average sales would Rs 30000
Cr then they will earned average profit of Rs 4420.64 Cr.
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11. I have also found that if company’s average profits were Rs
5000 Cr then they would be the average sales would be Rs
31437.86 Cr.
Bibliography
Websites: -
www.indianmba.com/Faculty_Column/FC720/fc720.html
http://www.india-now.org/Archives/ViewArticles.aspx?
art_id=16034&cat_id=598
www.indiabuget.nic.in
www.justtrade.in
(www.justtrade.in/download/stockreview/hcl_q4.pdf)
http://www.tcs.com/investors/documents/presentations/TCS-
Investor-Relations-Presentation-Feb-2009.pdf
www.infosys.com/investors/reports...2009/Q4/Q4-2008-AD.pdf
Books: -
Statistics for Management, 7th edition, Richard Levin & David Rubin,
Prentice-Hall of India private limited, New Delhi.
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