India Inc's big foreign acquisitions yield no more than tepid returns

Big-ticket acquisition by India Inc in the past two decades has not translated into good returns to shareholders.

 

In eight of 10 occasions, the share prices of firms that spent billions buying marquee assets have underperformed the broader market after acquisition.

 

Only two of the 10 biggest acquirers in the Business Standard sample — Hindalco Industries and Bharti Airtel — became market outperformers. Even then, in the case of the two, it’s doubtful if their recent outperformance on the bourses is due to domestic factors or the gains from acquisition overseas.

 

For example, the share price of Hindalco Industries, one of India’s top aluminium and copper producers, began to pull ahead of the Nifty 50 only two years ago, nearly 17 years after its $5.7 billion acquisition of Novelis Inc in February 2007.

 

However, its strong showing can be attributed to a global surge in the prices of industrial metals rather than Novelis’ contribution through higher earnings.

 

In the case of Bharti Airtel, its strong financial performance in the last two years and the resulting outperformance could be attributed to the emergence of a duopoly in the domestic telecom market rather than the operational and financial success of its $10.7 billion acquisition of Zain Telecom’s Africa business in March 2010.

 

After its recent outperformance, Hindalco Industries’ share price (adjusted for bonuses and share splits) is up 583 per cent cumulatively since it acquired Novelis compared to a 474 per cent rally in the benchmark Nifty 50 in the period.

 

Bharti Airtel’s stock price, on the other hand, has appreciated 573 per cent cumulatively since the acquisition of Zain Telecom Africa business compared to the 359 per cent rally in the Nifty 50 in the period. 

 

Other big acquirers, such Tata Steel, Tata Motors (erstwhile), Oil & Natural Gas Corporation, UPL, Reliance Industries, Biocon, Coforge, and Adani Green have failed to outperform the benchmark indices after splurging billions on acquisition. 

 

 

 

Tata Steel, which made the biggest ever overseas acquisition by an Indian company in 2006 and acquired the Corus group for $12.78 billion, remains an underperformer even 20 years later.

 

The steelmaker’s stock price is up 397 per cent cumulatively since that acquisition compared to a 551 per cent rally in the Nifty 50 in the period.

 

The erstwhile Tata Motors (now split into two companies) struggled to beat the broader market between March 2008 and October 2025 after it acquired the assets of Ford Motor Co’s Jaguar Land Rover (JLR) division in March 2008 for $2.3 billion.

 

Oil & Natural Gas Corporation (ONGC), a public-sector entity, too has struggled on the bourses after its $2.6 billion acquisition of Imperial Energy Corp Plc in August 2008. The company’s stock price is up just 78 per cent cumulatively since then compared to a 458 per cent rise in the Nifty 50 in the period.

 

Acquisitions even in recent years have struggled to deliver returns to shareholders. For example, agrochemical maker UPL has underperformed after its $4.2 billion acquisition of Arysta Lifesciences in July 2018.

 

It’s the same story with Biocon after it bought Viatris’ biosimilar business in 2022 and Reliance Industries’ acquisition of Walt Disney Co India for $8.5 billion in November 2023.

 

The share prices of Adani Green Energy and Coforge too have lagged the Nifty 50 after their mega acquisitions.

 

Analysts attribute the poor returns from such acquisition to the mismatch between the upfront capital spent on it and the financial returns generated by the acquired assets.

 

“Most of these are like small fish trying to gobble up big fish to become sharks. This requires a huge capital outlay, a large part of which comes from debt. This creates financial headwinds when the acquired business fails to perform as expected due to factors such as a demand slowdown or a sharp depreciation in Indian rupee,” said G Chokkalingam, founder and chief executive officer, Equinomics Research.

 

This shows in the disparity between the acquisition cost and the net worth of the acquirer on the eve of acquisition. With the exception of Reliance Industries and ONGC, for all other companies the acquisition cost was in multiples of their net worth. This forced the companies to fund acquisition through large borrowing, which became a financial millstone when their sector was hit by a financial downturn.

 

On average, the acquisition cost of assets was nearly four times the net worth of acquirer, leading to a sharp rise in the indebtedness of these companies after these big purchases. It also resulted in a sharp decline in financial metrics such as the return on net worth (RoNW) for these companies. In fact, the RoNW of most of these companies is even now lower than that prior to the acquisition. Low RoNW lowers these companies’ long-term growth potential and weighs on their equity valuation and share price performance.