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From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Wed Oct 27 2010 - 10:25:47 EDT
India Billionaires Go On Buying Spree in `Last Frontier' Africa
By Mehul Srivastava and Subramaniam Sharma -
Oct 27, 2010 5:18 AM GMT+0200
Apollo Tyres Ltd., India's second-biggest tiremaker by market value, bought
Durban, South Africa-based Dunlop Tyres International Pty for $62 million in
April 2006. Photographer: Nadine Hutton/Bloomberg
Indian billionaire
<http://search.bloomberg.com/search?q=Ravi%20Ruia&site=wnews&client=wnews&pr
oxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=w
nnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Ravi Ruia
flew to Africa every month for the past 18 months, buying coal mines in
Mozambique, half an oil refinery in Kenya and a call center in South Africa
for his Essar Group.
This month, executives of his
<http://www.bloomberg.com/apps/quote?ticker=ESSR:LN> Essar Energy Plc.
attended a conference hosted by Nigerian President
<http://search.bloomberg.com/search?q=Goodluck%20Jonathan&site=wnews&client=
wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&get
fields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>
Goodluck Jonathan to attract investors in the power grid. The officials,
backed by $2 billion the company raised in an April listing on the London
Stock Exchange, also mulled other "business opportunities" around Africa,
the company said.
Ruia, who controls the $15 billion Essar Group with his older brother,
Shashi, is not alone. Billionaire countrymen
<http://search.bloomberg.com/search?q=Sunil%20Mittal&site=wnews&client=wnews
&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfield
s=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Sunil
Mittal, chairman of India's largest mobile phone provider,
<http://www.bloomberg.com/apps/quote?ticker=BHARTI:IN> Bharti Airtel Ltd.;
<http://search.bloomberg.com/search?q=Adi%20Godrej&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Adi
Godrej, chairman of <http://www.bloomberg.com/apps/quote?ticker=GCPL:IN>
Godrej Consumer Products Ltd.; and
<http://search.bloomberg.com/search?q=Harsh%20Mariwala&site=wnews&client=wne
ws&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfie
lds=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Harsh
Mariwala, founder of <http://www.bloomberg.com/apps/quote?ticker=MRCO:IN>
Marico Ltd., have fueled a $15.8 billion buying spree in Africa since
January 2005.
"Africa looks remarkably similar to what India was 15 years ago," said
Firdhose Coovadia, director of Essar's African operations. "We can't lose
this opportunity to replicate the low-cost, high-volume model we've
perfected in India."
'Last Frontier'
Indian companies acquired or invested in at least 79 companies in Africa,
chasing business in less crowded markets after growing in a home economy
that expanded by an average 8.5 percent since April 2005.
Africa's gross domestic product expanded 4.9 percent a year from 2000 to
2008,
<http://www.mckinsey.com/mgi/publications/progress_and_potential_%20%20of_af
rican_economies/pdfs/MGI_african_economies_full_report.pdf> McKinsey & Co.
said in a June report. The continent's GDP will rise to $2.6 trillion by
2020 from $1.6 trillion in 2008.
Consumer spending may double to as much as $1.8 trillion by 2020 as
infrastructure is built and farm output increases, the report said. That is
the equivalent of adding a consumer market the size of Brazil.
"Africa is seen by the investing community as the last frontier," said
<http://search.bloomberg.com/search?q=Walter%20Rossini&site=wnews&client=wne
ws&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfie
lds=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Walter
Rossini, who manages $330 million in an India fund at Aletti Gestielle Sgr
Spa in Milan. "There is a higher risk, but then there is greater reward if
the political situation remains stable over the next 10 years."
Africa is new territory for Bharti, which paid $9 billion in June for mobile
phone operations in 15 countries and will rebrand them by year's end.
500 Million Roses
This month, Bharti executives sought advice at the Kenya offices of
Bangalore-based <http://www.bloomberg.com/apps/quote?ticker=KARG:IN>
Karuturi Global Ltd., the world's largest rose-grower.
<http://search.bloomberg.com/search?q=Sai%20Ramakrishna%20Karuturi&site=wnew
s&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&fil
ter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lan
g_ja> Sai Ramakrishna Karuturi, the managing director, said Africa is
driving his <http://www.bloomberg.com/apps/quote?ticker=KARG:IN> company's
success.
Six years ago, as he struggled to compete against flower growers in Africa
and Europe with lower freight costs and larger tracts of land, he bought a
small plot in Ethiopia. Sales since have grown 11-fold to $112.7 million in
the fiscal year that ended March 31.
He leases 311,000 hectares of land -- larger than the U.S. state of
<http://quickfacts.census.gov/qfd/states/44000.html> Rhode Island -- in
Ethiopia and Kenya, and his company sells more than half-a-billion roses a
year.
"I got in on the ground floor, others got in on the second floor, but
there's a lot of floors left to go in Africa's economic cycle," Karuturi
said. "Africa offered us a scale we could never reach in India."
26 Deals
Indian acquisitions in Africa peaked in 2008, when companies closed 26 deals
worth $3.1 billion. Those include the state-run <http://www.iffco.nic.in>
Indian Farmers Fertiliser Cooperative Ltd.'s $721 million purchase of
Industries Chimiques du Senegal, an idle phosphates producer that once was
the country's largest industrial plant. New York-based Ernst & Young LLP
handled 11 deals since 2005.
"We are seeing Indian companies look at Africa in a major way," said
<http://search.bloomberg.com/search?q=Anuj%20Chande&site=wnews&client=wnews&
proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields
=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Anuj
Chande, the London-based head of the South Asia Group at advisory and
accounting firm Grant Thornton U.K. LLP. "Compared to India, valuations are
quite attractive. We're expecting to see a lot of midsize deals across a
variety of sectors."
<http://www.bloomberg.com/apps/quote?ticker=APTY:IN> Apollo Tyres Ltd.,
India's second-biggest tiremaker by market value, bought Durban, South
Africa-based Dunlop Tyres International Pty for $62 million in April 2006.
That gave Gurgaon-based
<http://www.bloomberg.com/apps/quote?ticker=APTY:IN> Apollo two
manufacturing plants and a retreading unit in South Africa and Zimbabwe, and
brand rights to 32 African countries.
'Tata, Ambani'
"If tomorrow the Indian economy was to take a U-turn, then at least you have
other markets which are growing," said
<http://search.bloomberg.com/search?q=Neeraj%20Kanwar&site=wnews&client=wnew
s&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfiel
ds=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Neeraj
Kanwar, Apollo's vice-chairman and managing director. "I can't survive on
the Indian market alone."
The company aims to triple sales to $6 billion in five years, with 60
percent of revenue coming from outside India. In the fiscal year that ended
March 31, 62 percent of its $1.7 billion in
<http://www.bloomberg.com/apps/quote?ticker=APTY:IN> sales came from India.
Adi Godrej bought a hair-color company in South Africa and a soap and
body-lotion maker in Nigeria. His Mumbai-based
<http://www.bloomberg.com/apps/quote?ticker=GCPL:IN> Godrej Consumer
Products gets 23 percent of its total sales outside India, including Africa.
<http://www.bloomberg.com/apps/quote?ticker=MRCO:IN> Marico paid 520
million India rupees ($12 million) to buy the consumer division of
Durban-based Enaleni Pharmaceuticals Consumer Division (Pty) Ltd. in October
2007. Two months ago, it bought South African health-care brand Ingwe for an
undisclosed price.
<http://www.bloomberg.com/apps/quote?ticker=DABUR:IN> Dabur India Ltd.
started shopping on the continent in 2004, when it bought a hair-care brand
in Egypt and then a Nigerian cosmetics company.
"We need to now seek avenues of growth outside of India because India's
becoming saturated and hugely competitive," Dabur Chief Executive Officer
<http://search.bloomberg.com/search?q=Sunil%20Duggal&site=wnews&client=wnews
&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfield
s=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja> Sunil
Duggal said.
One reason why smaller Indian companies ventured into Africa is that their
budgets still attract attention in countries trying to woo foreign
investors, Karuturi said.
"I am not even a fly on the wall in India, but in Ethiopia I am the largest
investor, the second-largest employer after the government," said Karuturi,
whose company owns professional soccer and volleyball teams. "To do that in
India, you have to be a Tata or an Ambani."
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