* Expected to impact overseas M&A-bankers
* Industry lobby wants measures reversed
* Indian companies looking to expand abroad amid domestic
By Sumeet Chatterjee
MUMBAI, Aug 16 India's new restrictions on
capital outflows are likely to delay overseas acquisitions and
investment plans by India Inc at a time when many companies are
scouting markets abroad to beat the domestic economic slowdown,
bankers and companies said.
In its latest move to curb dollar outflows and stem the
rupee slide, the central bank on Wednesday cut the overseas
investment limit for companies to 100 percent of their net worth
from 400 percent, and further curbed gold imports.
Any foreign investment more than 100 percent of a company's
value would require central bank approval. Large state companies
were exempted from the rules, which came into effect
"It definitely will have a serious impact on M&A," said
Harish HV, head of corporate finance practice at advisory Grant
Thornton in India.
"These sort of sudden measures will derail a lot of
strategies people have put in place for their businesses."
The rupee fell to a record low on Friday on fears the latest
curbs, brought in by policymakers struggling to defend the
currency in a slowing economy and a toughening global
investment, could spook foreign investors.
Bankers and companies slammed the restrictions on firms,
some of whom have been looking to expand beyond India where the
economy is growing at its slowest pace in a decade, hitting
demand for products ranging from cars to steel.
"Ironic that we have controls on capital on Independence
Day. Feels like the 1980s," Anand Mahindra, chairman of India's
diversified Mahindra & Mahindra Ltd, said in a Twitter
Faced with a balance of payment crisis, India prised open
the economy in 1991.
Chandrajit Banerjee, the director general of the
Confederation of Indian Industry, said the restrictions would
dampen India's global aspirations and said he hoped the measures
would soon be reversed.
Backed by cheap loans, some of the companies in the recent
past have acquired companies much bigger than themselves.
Apollo Tyres in June agreed to pay $2.5 billion to
buy New York-listed Cooper Tire & Rubber Co, a company nearly
three times bigger than itself, to help boost overseas revenue.
The Apollo acquisition is yet to be completed and it was not
immediately clear if the new restrictions would impact the
transaction. Apollo declined to comment.
Some drugmakers including Sun Pharmaceutical Industries Ltd
and auto parts makers have been looking for overseas
targets much bigger than themselves to become global players,
several investments bankers told Reuters.
The head of investment banking at a large U.S. bank, who
asked not to be identified, said the curbs added another layer
"Many companies may just delay their plans hoping these are
short-term measures," the banker said.
The move could lead to a fall in India M&A deal volume this
year compared with 2012, said the banker. "The intention seems
to be stem the flow of every single discretionary flow of dollar
outside the country."
Completed M&A deals involving India declined 62 percent to
$18.3 billion last year, compared with 2011, making it the
lowest annual volume since 2005, according to Thomson Reuters
(Additional reporting by Aradhana Aravindan; Editing by David