M & A Values Registered A Drastic Drop

There seems to be a marked deceleration in mergers and acquisitions (M&As), according to the Reserve Bank of India (RBI) annual report.

The value of M&As has sharply declined to Rs 38,054 crore in 2000-01, from Rs 50,085 crore in 1999-2000.

The RBI report said 1,445 companies reported M&As during the last financial year, compared with 1,492 companies in 1999-2000.

M&As have been reported in transport, communications, food products, finance, computer software, chemicals & plastics and drugs and pharmaceuticals sectors in 2000-01.

Crossborder M&As, the report said, have mainly been in the information technology sector.

In 1999-2000, the sectors which witnessed substantial M&A activity and open offers were finance, chemicals, computer software, hotels, cements, pharmaceuticals, textiles and agricultural products.

According to the report, horizontal and vertical mergers will be covered by the competition policy.

Mergers involving large enterprises exceeding a prescribed threshold in assets value and turnover will come under the scrutiny of a Competition Commission of India.

The Parliament has passed the Companies (Amendment) Act 2000, signifying the importance and necessity of corporate governance in the wake of M&As.

The RBI has also said, the issue of transparency also leads to the question of corporate governance in banks. Reforms processes are only an enabling mechanism and leveraging it fully is possible only if the institutional players are receptive to good governance.

"The corporate governance practices in banks need be transparent and consistent, striking a balance between promoting safe and sound banking, on the one hand, and imparting to banks the necessary flexibility for effective competition on the other."

The apex bank has reiterated the need for good governance practices in banks, especially with regard to the constitution of bank boards and their accountability.