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Top 10 Mergers & Acquisitions in India for 2010

Tata Chemicals buys British salt

Tata Chemicals bought British Salt; a UK based white salt producing company for about US $ 13 billion. The acquisition

gives Tata access to very strong brine supplies and also access to British Salts facilities as it produces about 800,000 tons

of pure white salt every year

Reliance Power and Reliance Natural Resources merger

This deal was valued at US $11 billion and turned out to be one of the biggest deals of the year. It eased out the path for

Reliance power to get natural gas for its power projects

Airtels acquisition of Zain in Africa

Airtel acquired Zain at about US $ 10.7 billion to become the third biggest telecom major in the world. Since Zain is one

of the biggest players in Africa covering over 15 countries, Airtels acquisition gave it the opportunity to establish its base

in one of the most important markets in the coming decade

Abbotts acquisition of Piramal healthcare solutions

Abbott acquired Piramal healthcare solutions at US $ 3.72 billion which was 9 times its sales. Though the valuation of this

deal made Piramals take this move, Abbott benefited greatly by moving to leadership position in the Indian market

GTL Infrastructure acquisition of Aircel towers

This acquisition was worth about US $ 1.8 billion and brought GTL Infrastructure to the third position in terms of number

of mobile towers 33000. The money generated gave Aircel the funds for expansion throughout the country and also for

rolling out its 3G services

ICICI Bank buys Bank of Rajasthan

This merger between the two for a price of Rs 3000 cr would help ICICI improve its market share in northern as well as

western India

JSW and Ispat Ki Kahani

Jindal Steel Works acquired 41% stake at Rs 2,157 cr in Ispat Industries to make it the largest steel producer in the

country. This move would also help Ispat return to profitability with time

Reckitt Benckiser goes shopping

Reckitt acquired Paras Pharma at a price of US $ 726 million to basically strengthen its healthcare business in the country.

This was Reckitts move to establish itself as a strong consumer healthcare player in the fast growing Indian market

Mahindra goes international

Mahindra acquired a 70% controlling stake in troubled South Korea auto major Ssang Yong at US $ 463 million. Along

with the edge it would give Mahindra in terms of the R & D capabilities, this deal would also help them utilise the 98

country strong dealer network of Ssang Yong

Fortis Healthcare acquisitions

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Fortis Healthcare, the unlisted company owned by Malvinder and Shivinder Singh looks set to make it two in two in terms

of acquisitions. After acquiring Hong Kongs Quality Healthcare Asia Ltd for around Rs 882 cr last month, they are planning

on acquiring Dental Corp, the largest dental services provider in Australia at Rs 450 cr.

Terms from Economy

"Cash Reserve Ratio(CRR): Every commercial bank has to keep certain minimum cash reserves with RBI. RBI can vary

this rate between 3% and 15%. RBI uses this tool to increase or decrease the reserve requirement depending on

whether it wants to affect a decrease or an increase in the money supply. An increase in Cash Reserve Ratio (CRR) will

make it mandatory on the part of the banks to hold a large proportion of their deposits in the form of deposits with the

RBI. This will reduce the size of their deposits and they will lend less. This will in turn decrease the money supply. The

current rate is 6%. "

This is an important mechanism through which RBI controls liquidity in market and inturn the inflation.

"Bank Rate: RBI lends to the commercial banks through its discount window to help the banks meet depositors demands

and reserve requirements. The interest rate the RBI charges the banks for this purpose is called bank rate. If the RBI

wants to increase the liquidity and money supply in the market, it will decrease the bank rate and if it wants to reduce

the liquidity and money supply in the system, it will increase the bank rate. As of 5 May, 2011 the bank rate was 6%."

"Statutory Liquidity Ratio(SLR): Apart from the CRR, banks are required to maintain liquid assets in the form of gold,

cash and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger proportion of their

resources in liquid form and thus reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact.

A higher liquidity ratio diverts the bank funds from loans and advances to investment in government and approved

securities."

Repo Rate and Reverse Repo Rate in simple terms:

Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against securities. When the

repo rate increases borrowing from RBI becomes more expensive. Therefore, we can say that in case, RBI wants to make

it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for

banks to borrow money, it reduces the repo rate.

Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI. The banks use this tool

when they feel that they are stuck with excess funds and are not able to invest anywhere for reasonable returns. An

increase in the reverse repo rate means that the RBI is ready to borrow money from the banks at a higher rate of

interest. As a result, banks would prefer to keep more and more surplus funds with RBI.

More comprehensive explanation:

Repo rate or repurchase rate is the rate at which banks borrow money from the central bank (read RBI for India)

for short period by selling their securities (financial assets) to the central bank with an agreement to repurchase it at a

future date at predetermined price. It is similar to borrowing money from a money-lender by selling him something, and

later buying it back at a pre-fixed price.

Bank rate is the rate at which banks borrow money from the central bank without any sale of securities. It is generally for

a longer period of time. This is similar to borrowing money from someone and paying interest on that amount.

Both these rates are determined by the central bank of the country based on the demand and supply of money in the

economy.

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