Zoo Station

I haven't really commented on the TATA-Corus deal, partly because the news media was saturated with coverage of the deal. 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. That said, there might yet be a bidding war since there are supposed to be other steel companies planning to make counter bids and the belief among some Corus shareholders that Tata bought the company on the cheap. Tata must have factored this in, though they claim not to want to enter a bidding war. More importantly, 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 is an interesting story vis-a-vis FDI flows. For long, Indians have obsessed about the amount of inbound FDI, especially when compared to China. Interestingly enough, if this 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.