India Billionaires Go On Buying Spree in
'Last Frontier' Africa
24 October, 2010 | By Mehul Srivastava and Subramaniam Sharma
(Bloomberg)
--------------------------------------------------------------------------------
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 Sunil Mittal,
chairman of India’s largest mobile phone provider, Bharti Airtel
Ltd.; Adi Godrej, chairman of Godrej Consumer Products Ltd.;
and Harsh Mariwala, founder of 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, 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
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 Karuturi Global Ltd., the world’s largest rose-
grower. Sai Ramakrishna Karuturi, the managing director, said
Africa is driving his 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
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
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 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.”
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 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 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 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 Godrej
Consumer Products gets 23 percent of its total sales outside India,
including Africa.
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.
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 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.”
To contact the reporters on this story: Mehul Srivastava in Mumbai
at msrivastava6@bloomberg.net; Subramaniam Sharma in New
Delhi at ssharma@bloomberg.net.
To contact the editor responsible for this story: Bret Okeson at
bokeson@bloomberg.net.
.
'Last Frontier' Africa
24 October, 2010 | By Mehul Srivastava and Subramaniam Sharma
(Bloomberg)
--------------------------------------------------------------------------------
- Indian billionaire 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 Essar
Energy Plc. attended a conference
hosted by Nigerian President
Goodluck Jonathan to attract
investors in the power grid. The
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 Sunil Mittal,
chairman of India’s largest mobile phone provider, Bharti Airtel
Ltd.; Adi Godrej, chairman of Godrej Consumer Products Ltd.;
and Harsh Mariwala, founder of 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, 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
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 Karuturi Global Ltd., the world’s largest rose-
grower. Sai Ramakrishna Karuturi, the managing director, said
Africa is driving his 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
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
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 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.”
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 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 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 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 Godrej
Consumer Products gets 23 percent of its total sales outside India,
including Africa.
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.
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 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.”
To contact the reporters on this story: Mehul Srivastava in Mumbai
at msrivastava6@bloomberg.net; Subramaniam Sharma in New
Delhi at ssharma@bloomberg.net.
To contact the editor responsible for this story: Bret Okeson at
bokeson@bloomberg.net.
.
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