M&As deals in mining space up 173% at Rs 981 mn: E&Y

Led by Vedanta Group firm Sesa Goa's buyout of mining business of V S Dempo, Indian companies saw 16 M&A deals worth $981 million in the mining space in 2009, global consultancy Ernst and Young said in a report.

"Indian metal & mining companies completed 16 deals worth $981 million in 2009, an increase of 45 per cent in deal count and 173 per cent in deal value as against 2008," E&Y said in the report titled '2009: The Year of Survival and Revival.'

Vedanta group firm Sesa Goa acquired majority stake in V S Dempo's mining assets for $370 million in June 2009.

Coming out of the economic crisis and liquidity crunch, such transactions were subdued in first half of 2009 as firms focused more on de-leveraging and conserving cash, it said.

"..., 2010 looks set to show a strong growth in M&A in the sector in India. ...Although the global transaction market in 2010 will remain challenging and mega deals will be scarce," the report said.

Indian power companies would look to acquire more thermal coal properties in India as well as overseas and steel firms would look to tap the coal and iron ore reserves.

State-owned entities such as Coal Videsh Ltd, SAIL, International Coal Ventures may also succeed in their quest to acquire global properties in 2010. Coal Videsh already has mining leases for two coal blocks in Mozambique.

"A trend to watch for will be whether these companies will make outbound acquisitions this year. 2010 could be the year of Indian mining PSUs becoming multinational," said Vohra. Inbound and domestic M&A will be more consolidation focused, especially in downstream steel.

"A permanent change to deal financing strategies, greater investment from Asian buyers (mainly India and China) and ongoing volatility will characterize the 2010 transactions market in the mining and metals sector," the report said.

In India, the key driver for striking deals was resource security and backward integration across the supply chain, Vohara said.

"India was one of the few countries that witnessed increased deal activity, in terms of both deal value and volume in the sector in 2009," the report said.

In Asia, China saw the biggest such deal with Yanzhou Coal Mining Co acquiring of Australia's Felix Resources for $2.6 billion.